KPS Capital Partners LP replaced Oaktree Capital Management LP as the lead bidder in a bankruptcy auction of Furniture Brands International Inc.’s assets with a $280 million offer.
The New York-based private-equity firm will also replace Oaktree as the bankruptcy lender after U.S. Bankruptcy Judge Christopher Sontchi granted the furniture maker’s request on an interim basis at a hearing today in Wilmington, Delaware. Oaktree’s initial loan will be repaid.
KPS’s bid has “better terms, a higher amount and lower breakup fee,” Luc A. Despins, a lawyer for Furniture Brands, told the judge. “The law is clear and our hands are tied and we need to accept the higher and better offer.”
Furniture Brands, maker of the Broyhill, Lane and Thomasville home-furnishing lines, today also won court approval of guidelines that will govern its sale process. The company will hold an auction on Dec. 10 to determine if there are any better offers, followed by a Dec. 12 hearing to seek approval of the sale. Other bids must be submitted by Dec. 5.
The KPS offer is superior to Oaktree’s with “$20 million more in the headline amount,” better terms and no adjustments, Mark T. Power, a lawyer for unsecured creditors, said at the hearing. KPS “intends on operating the entire business” and virtually all current employees will be offered jobs, he said.
Furniture Brands entered bankruptcy after negotiating a deal with Oaktree to sell its assets for about $166 million, according to court documents. KPS pushed Oaktree to better its terms at Furniture Brands’ first hearing and indicated it would continue to pursue the furniture maker.
The private-equity firms battled back-and-forth last week, each submitting improved proposals, with Oaktree stopping at $260 million, according to court papers.
“KPS has created a very good day here for employees, customers,” Mark Thomas, a lawyer for the firm, said at today’s hearing.
Furniture Brands was forced to seek bankruptcy protection after a depressed housing industry and weak consumer spending led to falling sales, Chief Financial Officer Vance Johnston said in a court filing. Sales decreased 7.8 percent in the six months ended June 29 from the same period a year earlier.
The company, based in St. Louis, listed assets of $546.7 million and debt of $550.1 million in Chapter 11 documents filed Sept. 9.
Furniture Brands owes about $142 million in funded debt, including about $92.3 million on an asset-based revolving facility and $49.7 million on a term loan, according to court documents. The company also has about $200 million in unfunded pension obligations and about $100 million in trade debt.
The company, with about 9,000 employees, makes and distributes home decor in nine countries.
The case is In re Furniture Brands International Inc., 13-bk-12329, U.S. Bankruptcy Court, District of Delaware (Wilmington).