Furniture Brands seeks to drop $11M in leases
Heath E. Combs -- Furniture Today, September 30, 2013
ST. LOUIS - Furniture Brands International aims to reject more than 30 leases in Chapter 11 bankruptcy proceedings to unload about $11 million in yearly obligations.
Furniture Brands said it continues to pay rent at the locations, primarily closed stores, even though they have ceased operations at the sites or are in "the process of returning the keys to their landlords." The motion also includes subleases and ancillary agreements, mostly guaranty agreements that assure payment.
The motion, filed in U.S. Bankruptcy Court in Delaware, doesn't indicate which stores, if any, will close, or if guaranty agreements or subleases to independent dealers would be picked up by those dealers. Some of the Thomasville leases up for rejection are independent dealer stores.
"Many of those stores are dark. Obviously they are an obligation that Furniture Brands inherited and they can't get rid of the leases, except through cleansing through bankruptcy," said industry analyst Jerry Epperson. "It's amazing how expensive they were."
Leases, subleases and ancillary agreements are costing FBI about $910,000 a month - excluding amounts received by FBI under subleases, court documents said. A hearing is set on the motion for Oct. 2.
Of the leases, 12 belong to Lane - 11 to former Lane Home Furnishings stores and one for office space that is now subleased by Shane's Rib Shack in Atlanta. Each is a 10-year lease. Nine were signed in 2004 and 2005. The Lane retail format rolled out in 2002.
Three of the rejected leases belong to HDM retail space and another three are Broyhill retail leases.
Twelve leases proposed for rejection are for Thomasville stores. The Thomasville.com site on Sept. 13 listed 84 Thomasville branded dealers in the U.S. - 45 of which were FBI corporate stores. Industry sources report the remaining 39 are owned by independent dealers.
In its most recent quarterly report in June, FBI said its open store locations included four Drexel Heritage stores, one Henredon store, one Broyhill store and eight designer showrooms.
This month, Furniture Brands has closed two Drexel Heritage stores and five Thomasville stores. It plans to close another 14 corporately owned Thomasville stores in the next 60 days.
The oldest lease in the motion for rejection is a 15-yearold lease from Broyhill Furniture Inds. in Lenoir, N.C., that is set to expire in December. Another Broyhill lease is for a 202,928-square-foot warehouse in Riverside, Calif.
Only one lease in the group was signed during the tenure of current CEO Ralph Scozzafava, which began in early 2008 - for office space in Bentonville, Ark. The others were signed while former CEO Mickey Holliman was at the helm.
Industry sources said Furniture Brands stopped making lease guaranty agreements in the mid-2000s because they posed a mounting contingent liability - one depending on future events. In its second quarter report, FBI said the total amounts remaining under lease guaranties were $2.4 million.
In 2003, FBI had reported that it guaranteed total future lease payments of $94.8 million.