Furniture Brands Canada declares bankruptcy
Michael J. Knell -- Furniture Today, September 16, 2013
MISSISSAUGA, Ontario - Furniture Brands Canada has declared bankruptcy and all of its salaried employees have been let go. The move was made after its U.S. parent company sought Chapter 11 court protection from its creditors last week.
Furniture Brands Canada filed for an assignment under section 49 of the Bankruptcy and Insolvency Act. Robert Link of the Toronto-based Schonfeld Receivers & Trustees has been named the court-appointed trustee.
In 2009, FBI launched a unified strategy for the Canadian market creating Furniture Brands Canada under the leadership of industry veteran Mark Wiltshire, who later became the company's president of special markets, responsible for all of the company's international operations.
In early 2011, Furniture Brands Canada opened a 26,000-square-foot permanent showroom in the Toronto area. It was the first time that all of FBN's lines were represented north of the border.
The showroom has been shuttered and its landlord is included on the list of unsecured creditors and is owed C$32,468.
In its notice of bankruptcy, Furniture Brands Canada listed liabilities of just under C$2.2 million and assets of C$423,000. Its largest unsecured creditor was Furniture Brands Holdings of St. Louis, which is owed C$2 million. The next largest unsecured creditors are its salaried employees, who are owed just over C$72,750.
This past Monday, the St. Louis-based Furniture Brands International said it expects to enter into an asset purchase agreement with affiliates of funds managed by Oaktree Capital Management, a California-based investment firm. Oaktree has also agreed to provide $140 million in debtor-in-possession financing, including $50 million in new liquidity.
"The new facility, which is subject to court approval, will enable the company to operate business uninterrupted and continue to meet its financial obligations, including the timely payment of employee wages and benefits, continued servicing of customer orders and shipments, and other obligations," Furniture Brands said in a statement.
The agreement with Oaktree would include all of the company's brands - Broyhill, Thomasville and Drexel Heritage, among others - except for Lane Furniture, which is expected to be sold to someone else within the next 30 days or so, although the suitor for those assets hasn't been identified.
Phil Denning, a New York-based spokesman for Furniture Brands, told Furniture/Today that Furniture Brands Canada "will be included in the Oaktree acquisition" and it is part of the current restructuring process.
He also confirmed that Lane's operations in Canada will be spun out to the new owner - whoever that turns out to be - although the details of how will be done have yet to be decided.
"It is our intention that the company continue to operate," Denning said, adding that shipments to Canadian retailers are expected to continue uninterrupted.
Furniture Brands Canada counts Sears Canada and Hudson's Bay among its major retail accounts in this country. It also has supply agreements with Mega Group as well as a smattering of standalone Thomasville and Lane Home Furnishings stores across the country.
In all, it is estimated that Furniture Brands Canada ships to about 500 retail storefronts across the country.