Furniture Brands’ Bankruptcy Sets Up Sale to Oaktree

Furniture Brands International Inc., maker of the Broyhill, Lane and Thomasville home-furnishing lines, sought bankruptcy protection from creditors with a deal to sell most of its assets to Oaktree Capital Management LP for about $166 million.

The company, based in St. Louis, listed assets of $546.7 million and debt of $550.1 million in Chapter 11 documents filed today in U.S. Bankruptcy Court in Wilmington, Delaware. Eighteen affiliates also sought court protection.

Oaktree has also agreed to provide as much as $140 million in financing to help fund operations while the company pursues the sale, which is subject to court approval and a supervised auction process that may draw other bidders, according to a company statement.

“Our Chapter 11 process represents the best long-term solution for Furniture Brands to address its liquidity challenges, strengthen its operations and continue to provide our customers with the highest quality products,” Chief Executive Officer Ralph Scozzafava said in the statement.

Oaktree’s offer can be submitted as a so-called credit bid, allowing it to use forgiveness of debt to bid for the assets rather than cash. The Oaktree acquisition proposal doesn’t include the Lane brand. Furniture Brands said it’s engaged with other potential buyers for that line.

Shares Plunge

Furniture Brands plunged 47 percent to about 30 cents today in over-the-counter trading. The shares had dropped more than 92 percent this year before today after reaching a high of $10.57 on Feb. 6.

While the economy has seen signs of recovery, the housing industry has remained depressed and that, coupled with weak consumer discretionary spending, led to a decline in sales and a liquidity crunch forcing Furniture Brands to seek bankruptcy, Chief Financial Officer Vance Johnston said in a court filing.

Sales decreased 7.8 percent in the six months ended June 29 compared with the same period a year earlier, with higher-end brands outperforming the lower-priced furniture lines.

“Sales have continued to be depressed as a result of a sluggish recovery in the U.S. economy, continuing high unemployment, depressed housing prices” and consumers’ reluctance to make large purchases, Johnston said.

Funded Debt

The company 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. Furniture Brands also has about $200 million in unfunded pension obligations and owes about $100 million to trade creditors.

Furniture Brands owes its 30 largest unsecured creditors, including those of its units, about $25.9 million, court papers show. The company, which listed more than 25,000 creditors, said that funds may be available for distribution to unsecured creditors.

The company makes and distributes home decor in nine countries under brands that have endured for more than 100 years, according to court documents. Furniture Brands has about 9,000 employees globally and spends about $276 million on its roughly 5,400 U.S. employees annually.

Oaktree, based in Los Angeles, is the world’s biggest distressed-debt investor with $76.4 billion in assets under management as of June 30. The firm’s distressed-debt department has about $19.9 billion in assets under management, according to its website.

The case is In re Furniture Brands International Inc., 13-12329, U.S. Bankruptcy Court, District of Delaware (Wilmington).

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