by Upholstery producer cites challenges from soft demand to unsustainable costs for leases on properties it likely will need to consolidate or relocate as part of its reorganization
PONTOTOC, Miss. — Southern Motion’s recent Chapter 11 bankruptcy is part of an effort to reorganize its business structure, including the onerous financial obligations related to various leases for its operations.
That was a key message in a declaration filed by David Baker, a managing partner at Aurora Management Partners, an advisory firm and turnaround specialist the company has hired to help it get back on solid financial footing.
In his declaration, he noted that the motion upholstery producer was founded in 1996 and had an original manufacturing footprint that included eight plants covering more than 2 million square feet. He also noted it was the first and only major furniture manufacturer that offered a broad mix of custom options across its product lines. It currently employs 645 full-time employees.
He noted that in December 2025, Southern Motion’s parent company Gainline Recline Corp. was purchased by Hong Kong-based Man Wah, which gave Man Wah its own manufacturing footprint in the United States. As such, Man Wah loaned Southern Motion $26 million to cover its secured debt obligations with JP Morgan Chase & Co., which Baker said leaves it with no secured debt. And as of the Aug. 31 petition in the U.S. Bankruptcy Court for the Northern District of Mississippi, the company’s largest non-insider debt obligation is the unsecured debt owed to its landlord as part of a master lease.
The declaration goes on to note that despite many years of success as a manufacturer, Southern Motion began to experience weaker customer demand post-COVID that was tied to a slow retail market and weak housing demand. In addition, it said, furniture manufacturing costs have risen because of tariffs and rising fuel costs and container rates resulting from various factors in the global economy, including the war with Iran.
“Unsurprisingly, the combination of these challenges has had a negative effect on Southern Motion’s financial position,” Baker said, adding that the company has suffered operational losses every year since 2020. He noted that it previously owned its manufacturing operations, but in December 2018 entered into a sale-leaseback transaction in which it sold these properties and leased them back from the new owner under a master lease.
“In addition to being subject to the onerous lease terms, Southern Motion no longer needs all of the leased premises to meet customer manufacturing demand and cannot afford to continue paying the above market rent required by the master lease for all the leased premises,” the declaration continued. “Due to these financial challenges, Man Wah has repeatedly transferred funds to Southern Motion for continued operational expenses since Man Wah’s acquisition approximately nine months ago.”
Gabriele Natale, managing director for Man Wah USA, declined to comment at this early stage of the bankruptcy proceedings.
The statement went on to note that the company filed its Chapter 11 petition “with the support of as many of its stakeholders and creditors as possible by either negotiating a resolution of its obligations under the master lease with the landlord or relocating to another location with market terms.”
The declaration also includes several first-day motions to ensure the payment of taxes, utilities, vendor claims and employee wages along with insurance, which it said will “be critical to maintaining the stability of Southern Motion’s business operations and its relations with its employees and customers, thereby preserving value and allowing Southern Motion to focus its efforts on a plan of reorganization in this case.”
As of the Aug. 31 declaration date, the company said it owes about $315,000 in pre-petition wages and salaries and about $235,000 in accrued but unpaid sales commissions, along with about $450,000 in employee benefits and some $10,000 in reimbursable business expenses.
“Southern Motion believes that a failure to honor these claims will severely threaten employee morale, loyalty and well-being at a time when the employees’ continued dedication and support is critical to Southern Motion’s success in this Chapter 11 case,” the declaration noted.
Southern Motion also asked the court to extend the time it is required to pay its rent obligations to a time not to exceed 60 days from the Aug. 31 petition date. It said that being required to pay this before Oct. 29 would strain its financial resources and “threaten overall business operations and the success of this case. … Southern Motion submits that suspension in payment of the rent obligations during the extension period is the best way for it to maximize the value of its assets, maintain customer relationships and protect its employees by conserving funds otherwise required for payment of the rent obligation in order to continue ordinary operations until its revenues return to normal levels.”
