Lender pushes for Douglas Furniture liquidation
Seeks dismissal of Chapter 11 bankruptcy case
Larry Thomas -- Furniture Today, August 15, 2008
LOS ANGELES — Douglas Furniture’s principal lender has filed a motion to dismiss the company’s Chapter 11 bankruptcy case, arguing that the upholstery and casual dining resource has no realistic prospects of resuming operations.
In documents filed with U.S. Bankruptcy Court here, lender Heller Financial says the company’s assets are worth less than the $9.02 million Douglas owes Heller. Allowing the company to remain in Chapter 11 will merely burn through cash that could be used to repay Heller, the lender says.
“The bankruptcy case was filed for one reason — to liquidate property in which Heller holds a first-priority lean,” the motion states. “(Douglas) is no longer operating, and all that remains to be accomplished is the collection of accounts receivable. There are no other significant assets, and minimal prospects for sale.”
In its court filing, Heller says the accounts receivable have a book value of $5.33 million, while its inventory has a book value of $5.72 million. However, the inventory is located at the company’s two shuttered factories in Mexico, and under Mexican law, the company doesn’t have access to those goods.
“The value of the assets will not approach the total secured debt owed to Heller and the lenders in either a going concern sale or a liquidation,” Heller said in the filing.
Heller argues that the sale of the assets could be accomplished more efficiently, and with fewer administrative fees, out of court.
If the court doesn’t dismiss the case outright, Heller is asking that it be converted to a Chapter 7 bankruptcy, with liquidation overseen by a court-appointed trustee.
A hearing on the motion is set for Sept. 2.
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