Delaware Chapter 11: Art Van Furniture, LLC

On March 8, 2020 (the ” Petition Date “), Art Van Furniture, LLC (“Art Van” or the “Company”) and twelve of its affiliates (collectively, the “Debtors”) each filed a voluntary petition for relief under chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware.

 

 

Founded in 1959, the Company is a furniture and mattress retailer headquartered in Warren, Michigan, with 169 locations, including ninety-two showrooms and seventy-seven freestanding locations. The Company does business under several brand names, including Art Van Furniture, Pure Sleep, Scott Shuptrine Interiors, Levin Furniture, Levin Mattress, and Wolf Furniture.

 

Art Van has suffered declines in sales, profits, and cash flow in recent years, driven by a combination of factors. These include macro-related revenue headwinds due to declining traffic and share losses to online retailers such as Wayfair and Amazon, as well as local microeconomic pressures such as increased competition from key competitors such as Ashley HomeStore, Bob’s Discount Furniture, and Mattress Firm. In addition, while suffering declining revenue, the Debtors report they have faced increased expenses due to tariffs and marketing expenses intended to stem same-store sales declines. Lastly, the Debtors state they have faced numerous operational hardships in an effort to grow and navigate a challenging retail environment. The Company invested significant capital in these efforts, but many of the initiatives failed to meet expectations and were insufficient in offsetting countervailing headwinds.

 

Along with its advisors, the Company held discussions with potential buyers and investors, including its term loan lender who eventually declined to make a new money investment. Further conversations led to the potential for an out-of-court recapitalization involving a consortium of investors, but this consortium ultimately failed to secure the necessary capital due to a variety of circumstances, including the significant equity market impact of the coronavirus. After the Company’s forbearance agreement expired on February 28, 2020, the Company went into default under its credit facilities and focused its attention on launching a going-out-of-business process to preserve value. The Company began executing on plans for a wind-down and liquidation of its inventory, entering into an agreement with consultants to facilitate closing sales. In the days leading up to the Petition Date, the Company and its advisors negotiated and reached an agreement-in-principle with Robert Levin, the former owner of Levin Furniture, regarding a going-concern sale of certain of the assets of Debtors Sam Levin, Inc. and LF Trucking, Inc. The Company has commenced these cases to effectuate a going-concern sale of approximately forty-four stores and two distribution centres operating under the Wolf and Levin banners, and to wind down its remaining store locations and other operations through a going-out-of-business sales process ( See David Ladd Affidavit in Support ).

 

As of the Petition Date, the Debtors’ capital structure consists of outstanding funded-debt obligations in the aggregate principal amount of approximately of $208.5 million, consisting of $33.5 million in a credit facility with Wells Fargo Bank, National Association, and a term loan of $175 million from Virtus Group, LP. The Debtors’ total unsecured obligations are unspecified, but amounts due to their top trade creditors total over $63 million.

 

The Company has worked in concert with its secured lenders to develop a thirteen-week budget of $3,338,000 for the use of cash collateral to facilitate an expedited sale and orderly wind-down process.

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