Furniture Brands International Inc., maker of the Broyhill, Lane and Thomasville home-furnishing lines, won court approval of as much as $115 million in bankruptcy financing to help fund operations as it pursues a sale of most of its assets to Oaktree Capital Management LP for about $166 million.
U.S. Bankruptcy Judge Christopher Sontchi granted the company interim approval of the loan being provided by Oaktree at a hearing today in Wilmington, Delaware. The company will seek approval of the full $140 million financing package at an Oct. 2 hearing.
Oaktree’s loan and acquisition offers were modified during a break in today’s hearing after KPS Capital Partners made an alternative proposal, pushing Oaktree to better its terms.
“It was a productive recess,” Luc A. Despins, a lawyer for the company, told the judge. “I think the estate is much better off than it started this morning.”
Under the revised loan, the interest rate would be the London interbank offered rate plus 3 percentage points, payable in kind, and the fees have also been reduced, according to Despins. About $90 million of the loan will be used to pay off debt under an asset-based revolving credit facility.
If Oaktree is outbid at the bankruptcy auction, the loan would become due and payable. Oaktree is “not going to finance a reorganization for someone else to buy it,” Despins said.
While Oaktree’s offer for all of the furniture lines except Lane remains at $166 million, it has agreed that if Lane sells for less than $49 million it can match that offer and pay cash to make up the difference. The $166 million 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.
KPS Capital Partners, which would buy Lane as well, said that it would be active as the bankruptcy advances. “We will be around, when we see the documents we may come forward with a better DIP, a better APA,” said Mark Thomas, a lawyer for the would-be lender and buyer, referring to debtor-in-possession financing and asset purchase agreement.
The deadline for a sale to be completed as required by the bankruptcy financing was moved up about two weeks from 135 days after the bankruptcy was filed.
Furniture Brands was forced to seek bankruptcy protection because the housing industry has remained depressed and that, coupled with weak consumer discretionary spending, led to a decline in sales and a liquidity crunch, 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.
The company, based in St. Louis, listed assets of $546.7 million and debt of $550.1 million in Chapter 11 documents filed this week in U.S. Bankruptcy Court in Wilmington.
Furniture Brands owes about $142 million in funded debt (FBNI:US), 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 owes about $100 million to trade 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.
The case is In re Furniture Brands International Inc., 13-bk-12329, U.S. Bankruptcy Court, District of Delaware (Wilmington).
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