Douglas Furniture files Ch. 11
By Clint Engel -- Furniture Today, August 4, 2008
El Segundo, Calif. — Douglas Furniture has filed for Chapter 11 bankruptcy after years of declining sales and after its lender cut off its financing, according to court documents.
Douglas, once the world's largest producer of dinette sets, wasn't able to find a buyer willing to pay more than its lender was owed — about $9 million.
Its two large factories in Mexico have ceased operations and Douglas is asking the court to authorize its use of collateral cash to preserve the value of its business while it continues to seek a going-concern buyer or liquidates.
The California company filed for Chapter 11 bankruptcy in Los Angeles July 25. It listed assets of between $1 million and $10 million and debts of $10 million to $50 million. Its Las Vegas Market showroom was closed last week.
From 2000 to 2004 the company's gross revenues ranged from $124.5 million to $134 million, but dropped to $92.4 million in 2005 and $89.4 million in 2006. Last year, they fell to $68.7 million, according to the documents.
The sales decreases and operating losses continued in the first half of this year. Douglas officials cited "the general poor state of the economy, particularly the terribly troubled housing market."
Its lender, Heller Financial, a subsidiary of GE Capital, told the troubled company several months ago it was no longer willing to finance the business after the Heller debt matured June 30, according to a court document. That left Douglas with no options other than selling or shutting down, it said.
Douglas could not find anyone interested in buying the company as a going concern for more than the $9 million owed Heller, or for less with Heller's approval, the documents said.
Douglas is "still attempting to put together a deal," court documents said, but will remain shut down and "in liquidation mode" until or unless such a deal is done.
Norwest Equity Partners acquired a majority stake in the company in 2000. A year later, Douglas saw a rapid decline in its dining sales because of pressure from Asian imports, the company said. It said its upholstery business came under the same kind of pressure in 2005 because of imports.
In addition, Douglas went through several CEO changes during that period, which also hurt the company, it said.
Douglas implemented an import program in response, but "this was still not enough to offset the decline in sales and operating margins," it said in the filing.
Gordon Hitt, who has been the company's chief financial officer and now is working in that capacity as a consultant, told Furniture/Today last week that Douglas has been meeting with its current banking group, and other potential investors and lenders, interested in possibly acquiring all or part of the company.
"I think we've got a shot at it," he said, adding that the meetings were ongoing.
Hitt is authorized to handle the bankruptcy filing and assist the company with respect to any possible sale of assets and in attempting to confirm a reorganization plan, according to the bankruptcy petition.
Among Douglas' largest unsecured creditors are Baillie Lumber, with a $453,713 claim; Leggett & Platt, owed $338,911; and Morgan Fabrics, owed $300,851.
| Acknowledgements | ||
| Senior Editor Gary Evans contributed to this story. | ||
