by Markor focused on clearing off debt, preparing for reorganization
HIGH POINT — Just before the High Point Market, we reported that Jonathan Sowter had regained majority ownership of Jonathan Charles Designs. A peek into the financial filings of the seller gives us the numbers, which are a bit complicated.
Now, if you know anything about big Chinese furniture companies, you know any one of them has more names than Daenerys Targaryen in Game of Thrones. Every time the character is introduced, someone recites, “Daenerys Stormborn of House Targaryen, the First of Her Name, the Unburnt, Queen of the Andals and the First Men, Khaleesi of the Great Grass Sea, Breaker of Chains, Mother of Dragons,” and so on and so on. The list keeps growing as the show goes on, and it really does go on.
For its part, Markor trades and/or operates under the names Meike, ST Markor and Markor International Business Trading, and its furniture businesses are (or have been) Jonathan Charles, M.U.S.T. Holdings, Vietnam Furniture Resources and Vivet. Markor’s controlling owner is Markor Group.
Let’s do the numbers
The headline price for Markor’s 60% stake was roughly $7.4 million. Sowter already had a 40% ownership stake. But, a filing by Markor on the Shanghai Stock Exchange shows that after deductions, Sowter needed to pay less than $1 million in cash at closing for those 60% in shares. Most of the price was offset by debts that Markor’s subsidiaries owed JCD.
It would appear that Sowter paid below the company’s value, in other words, with most of the price offset by money Markor units owed. And the sum owed JCD is pittance compared to what Markor owes the Export-Import Bank of China, China Construction Bank and the Urumqi branch of China’s Industrial Bank, based on several notices of court actions. More on that in a minute.
The filings present a deal with Sowter effected as two connected agreements. First, Markor’s Hong Kong unit, Markor International Business Trading Co., agreed to sell Sowter its 46,113 shares of M.U.S.T. Holdings, a holding company in the British Virgin Islands that owns the Vietnamese manufacturing operation, Vietnam Furniture Resources. (Yes, more names.)
Secondly, Vivet, Markor’s Delaware subsidiary that ran the JCD brand’s U.S. operations, agreed to sell those operations to Heritage Furniture LLC, which Sowter set up in June for this acquisition. Assets include the brand’s intellectual property, inventory, contracts, licenses, business data and temporary use of a North Carolina warehouse.
The JCD factory in Binh Duong province, Vietnam, just inside or outside of Ho Chi Minh City, depending on which map you are looking at, will soon be expanding from about 800,000 square feet to 950,000 square feet, according to Sowter.
The filing values Markor’s 60% stake at $7.4 million, but four deductions totaling more than $6.4 million came off that figure:
+ $1 million for an advance Sowter paid on Jan. 27.
+ $5 million Vivet owed Jonathan Charles.
+ $387,000 owed by Markor and its Tianjin furniture manufacturing unit.
+ $99,000 in other payables from Vivet.
These deductions left about $925,000 due at closing, the amount reported by a Chinese newspaper, and possibly less, because the debts were to be re-counted on the closing date, according to the filing.
By clearing intercompany debts to the business it was selling, Markor stated in that filing, translated into English by Claude, that this “improv[es] the balance-sheet structure” of the company and its related parties.
To break down the deal even further, Heritage agreed to pay $4 million for the intellectual property, contracts, licenses and related rights, with inventory to be priced before closing on a sliding scale depending on how old the inventory is. Vivet carried about $5 million of inventory at the end of 2025 and about $4.4 million in assets as of June 30 this year.
No matter how you break it down, the sale price is below Markor’s $8.1 million book cost, and according to its filing, Markor did not commission an independent appraisal. Markor did point out that the $7.4 million is more than what it originally paid for its stake in late 2017, which was $4.9 million. It added $1.5 million in capital less than a year later, for a total of $6.4 million.
So, why did Markor sell? That’s not hard to figure out. The JCD sale filing is just one in a blizzard of notices since the beginning of August, most of them related either to a court-ordered reorganization or the many claims by lenders for what is owed them and now past due, to the tune of about $205 million.
These “worsening” finances and the pre-reorganization phase were increasingly hurting the JCD division, the filing explains, and Sowter had “repeatedly expressed his wish” to regain a majority or all of the company. Finally, it made no sense to sell the Vietnam factory but keep JCD, because the factory is that division’s “only source of product supply.” Such a sale would carry “substantial brand, inventory, sales and customer risk,” the filing explained.
This brings us back to the debts. On Oct. 9, a court in Urumqi in northwestern China ordered a combined reorganization of Markor’s controlling shareholder, Markor Investment Group, and two of its affiliates. And, there are at least 20 court cases involving Markor that have lenders demanding debts that are past due, to the tune of 1.47 billion yuan ($204-$207 million at 7.1–7.2 yuan to the dollar), according to a raft of filings posted at the Shanghai Stock Exchange website. And total creditor claims are much larger than the lawsuits, to the tune of approximately $720 million. (Of this amount, 1.85 billion yuan is “preliminarily confirmed”; 3.24 billion is “deferred” for review, so the totals do not represent exclusively uncontested debts.)
State-owned and/or state-associated banks own about 85% of the claims represented in the filings, and it’s difficult to parse which loans went to Markor or its owner, Markor Group. But, the claims do all put Markor on the hook. Even more troubling, the filings show instances in which creditors have begun seizing assets, though so far these have involved only smaller creditors. In addition, the interest meter on that debt is, of course, running.
Lastly, Markor Group is in reorganization, as well, so, both parent and furniture division need both reorganization plans to be approved and successfully carried out. Markor states that its operations are “normal.”
As for JCD, it is business as usual, Sowter told Home News Now last week.
“The only thing that has changed is that I have total control now as to what to do, how to do it and how to go about it,” he said.
Feng shui
Richard Feng founded Markor in Urumqi in 1990, and it began making furniture in 1992. Lots of furniture. Markor’s influence on the North American industry came from building for American brands and then buying those brands. Its two first U.S. purchases were companies it had already been making furniture for, Schnadig and A.R.T Furniture. Markor also began carrying Ethan Allen furniture in its stores in China in 2002. Acquisitions of Rowe Furniture and JCD followed, such that the Markor galaxy comprised four U.S. companies and 10 factories in China.
From 2022 to the present, however, losses have been growing, and it is these struggles that led to a court-ordered reorganization of the parent that began in April this year. In July, an investor group led by Xiaoci signed a reorganization investment deal worth about $150 million, and earlier this month, a court again ordered a consolidated reorganization of Markor Group and two of its subsidiaries, according to the filings. The furniture division is in what is called pre-reorganization, which is a sort of waiting room.
Shenzhen Xiaoci Investment (yes, a different name) is apparently a newly formed holding company, but there is not much online about the company. One report says it was set up less than three months before it signed the Markor deal in July. Another Chinese news account states that it is controlled by Li Shaofeng, a Shenzhen executive whose business is AI data-center hardware.
In a twist of fate, Markor had planned to buy Li’s company before Li’s group moved to take over Markor, according to a Chinese newspaper account.
Whew!
