Berkline files Chapter 11; has deal to sell inventory, equipment
May 3, 2011-- Furniture Today,
In a filing with U.S. Bankruptcy Court here, the company said a heavy debt load and recent sharp declines in sales made it impossible to continue as a going concern.
According to court documents, the company already has a tentative agreement to sell its inventory, raw materials and production equipment to a joint venture including Hilco Merchant Resources, Linon Home Décor Products, Maynard Inds. and Myron Bowling Auctioneers. Hilco, Linon and partners submitted the winning bid of $2.72 million at an April 26 auction, and have agreed to pay Berkline 80% of the proceeds from the sale of the merchandise.
Court documents said Great American Group submitted an initial "stalking horse" bid of $2.27 million, and will receive a $65,000 break-up fee since it wasn't the winning bidder at the auction.
Berkline said it will submit proposals regarding the sale of its intellectual property and its Morristown, Tenn., factories after an unsecured creditors committee has been formed.
Court documents said Berkline had debt of $209.9 million in term and revolving notes and another $12.5 million in other unsecured notes.
The company also submitted a list of its 30 largest unsecured creditors, which include several components suppliers, shipping companies, fabric producers and Chinese factories that produced a portion of Berkline's product line. The group is owed about $15.3 million
Industry creditors and their claims include:
Zhejiang Ausen Industry Co., $4.3 million; Haining Mengnu Group Co., $3.9 million; Ciar Spa, $782,198; Xiamen Comfort Science & Technology Group Co., $653,816; Wal-Mart Stores, $492,117; Foamex, $482,837; Foamworks, $432,974; Showplace, $345,879; Leggett & Platt Inc., $302,175; Lakeway Container, $300,993;
Also, Carroll Cos. (Carroll Leather), $275,494; Leggett & Platt (Taizhou), $274,675; Ausen Enterprises (Shanghai), $270,179; Haining Kareno Furniture, $256,688; Culp, $253,098; Taizhou Chenguang Vehicle Co., $252,826; Zhejiang Ausen Industry Co., $216,200; Morgan Fabrics, $215,406;
Also, Evergreen Shipping Agency, $209,942; Whitesell Corp.-MS, $203,262; JTM Enterprises, $199,516; Bluelinx Corp., $195,728; Topocean Consolidation, $186,490; Hanes Converting, $180,198; and Haining Kasen Leather, $147,027.
Berkline, which was best known for its motion furniture and home theater seating, ceased operations three days before the start of the April High Point Market after several failed attempts to sell the company as a going concern.
According to an affidavit filed by Chief Restructuring Officer Keith Cooper, the company provided financial information to seven potential buyers but was "unable to reach agreement and secure needed financing on acceptable terms."
"Even with the success in reducing their fixed costs, the debtors have not been able to generate sufficient cash flows to meet their continuing obligations," Cooper wrote. "The debtors simply have far too much debt, especially in the current economic environment."