DeFehr Furniture seeks protection

Case goods producer aims to restructure

Michael Knell -- Furniture Today, October 1, 2008

WINNIPEG, Manitoba - A strong Canadian dollar and a weak U.S. economy claimed another victim late last week when case goods producer DeFehr Furniture sought and received court-ordered protection from its creditors.

DeFehr and a subsidiary, Braman Furnishings Group Ltd., filed for protection under the Companies' Creditors Arrangement Act. According to a report in the Winnipeg Free Press, DeFehr owes more than 100 creditors more than $2 million.

President and CEO Andrew DeFehr said the company needed CCAA protection to give it time to restructure. He said he believes it will emerge from protection by the end of this year as a more competitive furniture manufacturer.

"We're hoping to be in the 500- to 600-employee range making between C$40 million to C$45 million worth of furniture every year," he told the Free Press.

DeFehr had as many as 1,100 employees two years ago when it took over Palliser Furniture's remaining domestic case goods operations. At the time, its strategy was to produce midpriced adult and youth bedroom, home office, home entertainment and hospitality furniture. The Brick, Leon's, DuFresne Furniture and Sears Canada are its largest Canadian retail accounts.

"There's a lot of competition out there. The U.S. business just isn't there for us. We need to resize our company. The CCAA allows us to do that without a lot of pain," he said.

A few weeks ago, DeFehr announced it would close one of its two Winnipeg plants and consolidate manufacturing in its remaining facility and that as many as 200 of its production workers were to be laid off by the end of year.

DeFehr said operations will continue during the restructuring.

DeFehr told the Free Press the downturn in the U.S. economy is making Canadian banks more cautious about lending out money.

"We're a very vertically integrated company. We have lots of raw materials. Lenders are less inclined to work (with companies like that)," he was quoted as saying. "The U.S. is a very scary place to do business right now. Retailers are having trouble getting credit to buy their product from manufacturers."

While DeFehr's Canadian business has been growing in recent years, it's not enough to sustain the company's current capacity.

"We have good orders and a strong backlog but the weight of two large factories was too much to keep them both viable," he said.