Domain Home files Chapter 11
Asks vendors to help in restructuring
Clint Engel -- Furniture Today, January 19, 2008
NORWOOD, Mass. — Domain Home filed for Chapter 11 bankruptcy protection Friday, aiming to reorganize as a going concern but also noting the possibility of liquidation.
The upscale 27-store retailer, founded in 1985 by CEO Judy George, ran into difficulties after its 2002 acquisition by Aga Foodservice and the subsequent expansion of its stores to include Aga’s high-end ranges and other products under a co-branding strategy, according to a court document.
Domain was sold again in June to a group led by Synergy Enterprises as the majority stakeholder. But the retailer “continued to suffer significant liquidity issues” as suppliers cut terms and credit lines, lender Wells Fargo reduced the retailer’s borrowing capacity and consumer traffic declined in the major malls where Domain’s stores were located.
“At the same time, more macroeconomic forces, such as a severely depressed real estate environment, lack of overall consumer confidence and a forecasted economic recession, continued to erode the company’s sales, margins and working capital,” Domain Chairman and Synergy Chairman and CEO Gary Nacht said in an affidavit.
The retailer’s 27 stores in Massachusetts, Connecticut, New Jersey, New York, Pennsylvania, Maryland and Virginia will remain open during the Chapter 11 proceedings, the company said in a release.
Domain has assets and debts both greater $10 million, according to the petition filed in Delaware. Home furnishings suppliers are listed among its largest unsecured creditors, led by Paladin Inds. with a $1.1 million claim. The next largest industry creditors and their claims are McCreary Modern, $772,230; Key City Furniture, $456,228; Natuzzi, $339,555; and Artistica Metal Designs, $267,437.
Paladin owner and President Tim Bolick said his company, a custom-order upholstery producer, actually is not owed the money, having factored the entire amount of the claim without recourse through Wells Fargo and BB&T.
Sources have told Furniture/Today that George is working on getting suppliers to help in the restructuring by taking an equity stake in a scaled-down Domain.
Domain said its board voted to “refocus its management team” during the reorganization, with George leading “an aggressive fundraising campaign to seek investors for the company” and Tony Castelli, vice president of stores and operations, assuming responsibilities for day-to-day operations.
Bolick confirmed that he and other suppliers on the creditors list were on a conference call with George last week. He said that taking an equity stake “was brought up as a possibility,” but his company hasn’t made any decisions yet and he doesn’t believe others have either.
“I think the best possibility would be for Domain to secure financing from a financial institution or others that would allow her to continue to operate,” Bolick said.
“I owe a lot to Domain and to Judy because we’re only six years old and she really helped us mature and grow our business, so I owe her every opportunity I can give her without putting Paladin in a financial bind. But I think the best option right now is to find a lender to come in and bring them out of bankruptcy,” he said.
“Domain has been my lifelong passion and I will fight for our future,” George said. “I’m taking every possible measure to protect my customers and employees, who are like family to me.”
She added that Domain’s team is “deeply committed to serving our customers and working constructively with our vendors to get our operations back on track. We hope our company will be here for many years to come, providing the high-style, quality home furnishings our customers have come to expect from Domain.”
In his affidavit, Nacht said, “The debtors remain cautiously optimistic that with additional needed resources they could reap the benefits of initiatives that have already reduced costs and created a foundation from which a going concern may be preserved.
“At the same time, however, the debtors recognize that it is possible that the interests of their creditors will be best served through a wind down of their business through an orderly liquidation.”
Domain is ranked No. 93 on Furniture/Today’s Top 100 with estimated furniture, bedding and accessories sales of $66.3 million in 2006 at 29 stores. Total revenues were estimated at $71.3 million.
