What’s behind the bankruptcies of the past year?

Almost exactly a year ago, more than 2,700 furniture factory workers, truck drivers and office personnel got the big bald turkey of an email that notified them of the immediate shutdown of United Furniture, owners of Lane Furniture. Happy Thanksgiving! 

That fateful, insensitive email also ordered truck drivers making shipments to turn around and get their loads back to United warehouses by week’s end, giving a new, ironic definition to the term dead-head delivery. 

United’s abrupt shutdown affected facilities in Mississippi but also in Winston-Salem, High Point, Archdale and Lexington, North Carolina. We didn’t know it at the time, but that shutdown was also the beginning of the industry’s stark losing streak, a big black eye on the industry sustained in the dying gasps of the end of 2022.

Another big black eye opened the new year: a Chapter 11 filing by Serta Simmons Bedding, owned by private equity firm Advent International. February brought the demise of Tuesday Morning, which filed for bankruptcy for the second time in three years. In April, Bed Bath & Beyond filed before liquidating. 

Summer proved quiet, but that was the deceptive calm before the rush to bankruptcy courts by some big furniture names. 

In shockingly quick succession starting in August, we watched Klaussner close and ultimately go into receivership, followed by, Mitchell Gold + Bob Williams, Noble House Home Furnishings and Z Gallerie each filing petitions for bankruptcy during the months of September through October. Z Gallerie was filing for the third time. 

Overlooked in the buzz generated by Klaussner’s filing was the Chapter 7 filing by the 81-year-old, Pennsylvania-based Altmeyer Home Stores in July, a petition that shuttered 11 stores and put 125 creditors in queue.  

The skein of closings has hit North Carolina especially hard. Just as the High Point market opened in October, the state’s Department of Commerce announced that more than 8,100 workers had been laid off to that point this year. The shutdown of Mitchell Gold in Taylorsville, Hiddenite and Statesville resulted in 533 jobs lost, while Klaussner’s closing in Asheboro sent more than 880 workers home.

Spinning the narrative

The narratives for most of these shutdowns focused on only a few causes: post-pandemic declines in consumer demand, rising interest rates, off-the-cliff drops in home sales, and the ever-popular “unforeseen circumstances.” Both Klaussner’s and Mitchell Gold’s announcements blamed their creditors. 

If big corporate buyouts of furniture companies have taught us anything, it’s that these narratives are far too tidy. These furniture makers did not cease operations overnight, and each scenario is different. Creditors generally want their clients to survive, if only to pay back their often sizable loans. In United’s case, Wells Fargo is on the hook for more than $99 million, according to the court documents. 

Beyond the all-too-easy narrative of stingy creditors, how each of these once-proud industry names were run into the ground is a story worth telling. But how do we get these stories? 

The CEO or, if that CEO has already made a dash for the sand dunes of Barbados, the CFO typically releases a bland statement that includes a roll call of typical business challenges like the ones I just listed. Z Gallerie CFO Robert Fetterman, for example, cited overhead expenses and “liquidity constraints” that were compounded by higher supply chain and import costs. “Liquidity constraints”? Doesn’t that mean you ran out of cash because you spent more than you made? 

In Klaussner’s case, the company ended six decades of operation by throwing its “lending source” under the bus, claiming that its bank “unexpectedly refused to continue to fund the company’s operations,” the official statement read. “This outcome was not reasonably foreseeable, but due to these unexpected circumstances, Klaussner can no longer sustain its operations.”

Not reasonably foreseeable? You never saw it coming? The need for yet more cash on loan wasn’t a big, fat indicator of dark fiscal clouds gathering? I simply don’t believe that.  

Blame the banks

Mitchell Gold spun a similar story, blaming PNC Bank for refusing to play ball. A letter from then-interim CEO Chris Moye said the 34-year-old company closed because it couldn’t “secure critical financing to continue business operations,” according to the Taylorsille Times newspaper. 

How does this line up with the fact that Mitchell Gold owner the Stephens Group paid down $20 million of Mitchell Gold’s $23 million PNC debt held in June, as HNN’s Tom Russell reported in September?

Doesn’t failing to secure additional funding mean you ran out of cash because you spent more than you made? Did Mitchell Gold’s sectional-sized ego have anything to do with it? We may never know, because once these filings and petitions are made, everyone lawyers up, a trustee of the court begins the difficult challenge of salvaging even dimes on the dollar to repay creditors, and the principals scatter, scarper and scutter away.

Yes, the bankruptcy filings can be scoured for nuggets of insight. Just such a scouring revealed that Wells Fargo Bank motioned to press United Furniture and its 10 affiliates into a Chapter 7 rather than Chapter 11, filing a 377-page emergency motion to do it.  

In that motion, Wells Fargo stated that United contacted the bank “with little prior notice” on Nov. 21, 2022, or the same day it turned the lights off in its factories, advising Wells Fargo that it needed “substantial capital” or it would not be able to fund continued operations.

According to the bank’s motion, “Wells Fargo advised UFI’s management that it could not agree to the request for additional funding on such short notice without additional information, including a budget for restructuring purposes and internal credit committee approval.” 

This sounds perfectly reasonable. Clearly, United had already made its decision, because later that same day, United announced it would “immediately cease operations and lay off all of its employees,” according to court documents. That doesn’t look like a reorganization to me.

Undercutting United’s official narrative of “unforeseen circumstances,” Wells Fargo’s court filing also revealed that it had signed a credit agreement with United in January 2021 to provide the furniture manufacturer with a revolving credit line of up to $130 million. That agreement was changed four times in two years, presumably to offer United yet more capital. Unforeseen circumstances? 

At the time of its bankruptcy filing, or nearly three years after the credit line had been set up, United owed Wells Fargo more than $99 million in secured debt, according to the bank’s motion to U.S. Bankruptcy Court for the Northern District of Mississippi. Within 48 hours after laying off nearly 3,000 workers, United’s entire team of officers and executives had resigned, according to Wells Fargo’s request for liquidation. 

Also according to Wells Fargo, United simply bugged out of its facilities, all 15 of them, failing even to secure the sites against theft. The bank states that it had to hire security, spending more than $1 million to protect United assets. 

In June, under Chapter 11 protection, United agreed to a sale of all its properties to Phoenix Acquisition for $65 million, netting the Milwaukee-based company 5 million square feet and property totaling more than 625 acres, according to a press release put out by the parent company, Phoenix Investors.

(It’s not lost on us that the Phoenix mythically rises from the ashes. For the sake of the communities involved, it’s hoped this myth becomes reality and these facilities again provide those North Carolina and Mississippi communities with jobs.)  

We want to hear from you 

All of this is really to say that Home News Now is interested in the real stories beyond the court filings and informed hunches. Home News Now is interested in the facts as those who experienced these shutdowns know them. Beyond narrative and spin, behind the smoke and mirrors of “unforeseen circumstances” and the alleged inflexibility of lenders, what really pushed these once-noble names into financial purgatory? Why did so many have to lose their livelihoods? Where did the highly compensated executives and officers flee to? What did they take with them? 

Understandably, with litigation flying in several of these rather messy bankruptcies, including United’s and Klaussner’s, people are wary of what might end up in a deposition. However, information — the facts — can be corroborated. We are interested in getting as many of people’s stories as there are people willing to share them, from wherever on the organizational chart a person’s title might have appeared. 

If you are interested in sharing your story, we are interested in hearing it. As Seymour Hersh, a long-time investigative reporter, once told me, “The truth we may never know, but history we will always have. May we learn.” 

Journalism is often called history in a hurry. It’s time to add to and balance out what is a very one-sided history. We’re listening.

Editor’s note: The U.S. Bankruptcy Court for the District of New Jersey set a Dec. 5 deadline for bids on the assets of DirectBuy Home Improvement, which does business as Z Gallerie. An auction is planned for Dec. 7, as reported by Home News Now.

Also, two weeks ago, Surya acquired the Mitchell Gold + Bob Williams brand and manufacturing operations with plans to restart the company’s manufacturing operations in Taylorsville. Assets include the brand name and intellectual property and designs for a wide mix of SKUs across its furniture, rugs, lighting and accent categories. The purchase does not include the assumption of any part of its shuttered retail operations.