ABERDEEN, Miss. – Three creditors, including bank Wells Fargo, have made moves to push Lane Furniture into an involuntary Chapter 7 bankruptcy filing with the U.S. Bankruptcy Court here.
Joined by two other creditors of United Furniture/Lane Furniture, Wells Fargo said in court documents filed Dec. 30 that the move is necessary to help offset the $99.2 million the furniture maker owes the bank.
Wells Fargo is joined in the petition by Security Associates of Mississippi/Alabama, a security firm hired by Wells Fargo to protect the closed Lane factories; and V&B International, a Port Gibson, Miss., hardwood sawmill and wood products manufacturer. According to court documents, United Furniture owes the three companies more than $99.5 million, excluding interest, fees and expenses.
United Furniture abruptly shuttered its doors Nov. 22 and informed all employees via email or text that the company was ceasing operations. The closure shocked the industry and has resulted in a number of lawsuits by former employees and suppliers.
The court filing outlines a few more details of the week of the company’s closing. According to a declaration included with the petition, Marc Grossman, managing director of Wells Fargo, said United management contacted the bank Nov. 21 “with little prior notice,” advising that the company needed “substantial capital immediately or it would not be able to fund continued operations.”
According to Grossman’s document, the bank was owed more than $97.8 million in principal under the credit line and “UFI was in default under various provisions of the credit agreement.” Because of that default, Wells Fargo told the management team that it “could not accede to its request for the additional funding on such short notice without additional information, including a budget for restructuring purposes and internal credit committee approval at Wells Fargo.”
Late on that same day – Nov. 21 – United Furniture’s management told Grossman that it had decided to “cease operations and lay off all of its employees effective immediately.” In addition to shuttering its operations, United Furniture left its 15 facilities without security and without insurance coverage after Nov. 30.
On Nov. 22, the bank was told that all “officers of UFI had resigned effective immediately, with the exception of UFI’s CEO and CFO, both of whom resigned on Nov. 23, 2022.”
With the notice that the officers had resigned, Wells Fargo hired Focus Management Group, a turnaround company to help secure United’s properties and systems and to begin liquidating Wells Fargo’s collateral.
The court documents tell a tale of United Furniture’s financial struggles. The Grossman declaration shares details of a credit agreement signed Jan. 28, 2021, that provided the company with a Wells Fargo credit line of up to $130 million.
The credit line is “fully secured by all of UFI’s personal property and other assets, including all of UFI’s cash, receivables, inventory, chattel paper, furniture, equipment and books and records, on all of which Wells Fargo has a lien”, according to the declaration. The agreement, Grossman said, was amended four times – March 8, 2021; Jan. 31, 2022; June 30, 2022; and most recently July 1, 2022.
Wells Fargo, V&B International and Security Associates of Mississippi/Alabama have requested the bankruptcy court to appoint an interim trustee, require one or more members of the United board to be responsible for filing financial details and appear under oath, require United to respond to the filing within 10 days and set a trial within 20 days.