Jan. 6 request to convert bankruptcy to Chapter 11 indicates rehired execs have worked behind the scenes to ‘maximize the company’s value for all stakeholders‘
TUPELO, Miss. — United Furniture Industries — the company that disappeared overnight on Nov.. 21, first with a mass firing of its entire workforce by text, followed by an ongoing failure to pay money owed to employees and other creditors — appears to have risen from the dead.
In United States Bankruptcy Court for the Northern District of Mississippi, the defunct company suddenly reappeared in public view, “respectfully” asking the court to convert a proposed Chapter 7 bankruptcy proceeding to a Chapter 11 case.
This follows the filing of an involuntary petition on Dec. 30 by Wells Fargo and two other creditors that would force the company into Chapter 7. The goal of Chapter 7? To initiate a plan to identify and liquidate the company’s assets for the benefit of its creditors.
As many familiar with bankruptcies know, a Chapter 11 is a process of reorganization in which a company pursues a path forward such as continuing to operate its business, selling its assets to a new owner and possibly borrowing more money — with the court’s approval.
With nearly $100 million owed to Wells Fargo alone, more than $80 million allegedly owed to factories in Asia and another $12.4 million owed to another bank called Renasant Bank, it’s not clear who would loan money to or do business with United again.
Of course crazier things have happened before — remember how Furniture Brands International went bankrupt only to have its family of brands reemerge as Heritage Home Group? Which by the way also filed for bankruptcy several short years later. Between both cases, it’s unclear how much unsecured creditors lost in the process, but industry observers have said its likely in the millions.
Yet United’s motion suggests that it’s working on a strategy to “preserve the company’s assets, prevent a loss to the estate and develop a strategy to maximize the company’s value for all stakeholders.”
If some of this sounds strikingly similar to a Chapter 7 proceeding, it is, so it’s not immediately clear why the company is pursuing Chapter 11.
Certainly a lot has been happening behind the scenes. And most of this hasn’t been revealed publicly until United’s Jan. 6 filing, submitted just before the court’s scheduled hearing for the appointment of a trustee in the Chapter 7 petition.
For example, the company began an immediate search for replacements for former UFI CEO Todd Evans and Chief Financial Officer Lynda Barr, both of whom resigned Nov. 23, following the closure of the company’s facilities the day before.
Barr soon became a consultant for Wells Fargo in connection with UFI. Dan Siggers, who was mostly recently UFI’s chief operating officer, declined an opportunity to continue in that position, also taking a role as a consultant for Wells Fargo in connection with UFI.
But UFI found others willing to step in. These include former corporate controller Kimberly G. Harper, who has been named chief financial officer, and Mark S. Melickian, whom Harper chose to serve as UFI’s general counsel.
According to the filing, Harper reemployed several former UFI colleagues to assist with the wind down, including Amanda Spencer and Starla Reaves, who were contracted to help with accounting, and Helen Benefield, who was hired for human resources and payroll issues.
In addition, the company hired Carol Davis for IT administration and Isiah Hurd and Russell Conerly, who were contracted for network administration and systems support.
“Throughout December, Ms. Harper and her team have worked diligently on issues critical to the maintenance of assets and continuity of critical accounting and HR resources,” the Jan. 6 filing stated. “Included within those efforts were steady communication and negotiation with the company’s payroll and health/benefit insurance administrators as well as insurance companies.”
All this took place by early December. Also in early December, the company hired Oxford Restructuring Advisors to prepare the company for a bankruptcy filing, “including the preparation of petitions, schedules and statements. Oxford immediately commenced that work.”
Other developments include:
+ The hiring of Hahn Loeser & Parks LLP as a restructuring co-counsel to work with attorney Mark Melickian in preparing UFI for a Chapter 11 filing in the Southern District of Ohio because “UFI is an Ohio Corporation.”
+ The appointment of Alpesh A. Amin as chief restructuring officer. UFI, the motion states, hired his consulting firm Riveron Management Services to provide additional support services in connection with a planned Chapter 11 filing.
+ Finally, on Dec. 30 just before the filing of Wells Fargo’s involuntary Chapter 7 petition, United completed negotiations with a company called Epiq Global to “provide claims agent and noticing services in a Chapter 11 filing.” The Jan. 6 filing said that this work was idled “pending the outcome of the motion for the appointment of an interim trustee.”
“Since the involuntary petition was filed … the debtor has continued to operate its business in the ordinary course,” the filing stated.
All this is meant to convey that the company has been working diligently behind the scenes to manage the mess its ownership made with the decision to abruptly cease operations, thinking it would somehow avoid any public scrutiny along the way.
The filing also takes issue with Wells Fargo’s Chapter 7 petition, saying that filing was meant solely to hinder United’s liquidation plan. “As the facts demonstrate, an interim trustee is not needed, nor is it warranted based on the facts of this case,” United said.
United also contends that Wells Fargo knew that it had the proper management in place to effectively carry out a successful transition. The filing also states that United’s inability to repay Wells Fargo does not constitute a basis to appoint an interim trustee to carry out a Chapter 7 proceeding and that an interim trustee will not preserve the value of the company’s assets.
“Here there is zero proof whatsoever of fraud, dishonesty or gross mismanagement,” the filing states. “Wells Fargo merely contends that in the absence of management that this court should install an interim trustee.”
Wells Fargo declined to comment for this story.
But there’s another angle that wasn’t mentioned in United’s filing and certainly one the court should consider in granting its request to convert the case to Chapter 11: All the employees left without a job without the required 60 days’ notice just weeks before Christmas.
One former employee told Home News Now that receiving that text out the blue and finding herself without a job the next day was one of the most traumatic things she has ever experienced. The same is likely true for another 2,699 workers who found themselves without a job as well.
Now perhaps all the professionals behind the scenes are working day and night to get these workers the money they are owed by law — a figure sources believe based on estimated weekly payroll expenses likely exceeds $20 million.
But no one from the company is telling that story of what the company might be doing to get these workers what they are owed.
That’s likely another battle that will have to be fought in the courts — as will what’s owed to dozens of creditors in this case beyond Wells Fargo and Renasant Bank.
The court is expected to decide whether to convert the case to Chapter 11 by next Friday, Jan. 13, an ominous date for sure. We can only hope for the sake of those employees and creditors involved that the court makes the right decision.