Sun Capital affiliate acquires 5% stake in Furniture Brands
By Furniture Today Staff -- Furniture Today, March 11, 2007
St. Louis — SCSF Equities LLC, an affiliate of Sun Capital Partners, has disclosed to the Securities and Exchange Commission that it has acquired a 5% stake in Furniture Brands International.
Meanwhile, FBI also said it has asked key lenders to ease the financial covenants contained in two loan agreements, and said it probably will be out of compliance with the agreements if changes aren't made by March 31.
Boca Raton, Fla.-based SCSF's purchase of about 2.43 million shares makes it one of the 10 largest shareholders in Furniture Brands.
On March 2, the day after the disclosure, FBI's stock rose more than 12%.
Analysts did not view a buyout as imminent, but said the purchase was a sign that the stock may be undervalued.
In January, a Sun Capital Partners affiliate acquired importer L. Powell Co. and upholstery manufacturer Rowe Cos., adding them to an industry portfolio that includes manufacturer Lexington Home Brands and retailers Nationwide Furniture and Wickes.
In a filing with the SEC regarding the loan covenants, FBI said "the present outlook for business conditions indicates we will likely not be in compliance" as of March 31.
The company said it was optimistic that negotiations can be completed by the deadline, although it noted the result could be increased costs and a reduction in the size of its revolving credit line.
The loan agreements cover a $400 million revolving credit line put in place in April 2006, and a private placement of $150 million in senior notes that were sold in May 2006. According to the SEC filing, FBI has used about $169.2 million of the credit line.
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