Competing bids for bankrupt Furniture Brands International could be good news for one of the company’s major subsidiaries, Lane Furniture Industries.
Furniture Brands will be in bankruptcy court in Delaware today, as a judge will consider several motions.
Among them: equity firm Oaktree Capital Management’s “stalking horse” bid for the furniture company’s assets, including Lane.
A stalking horse bid sets a minimum on an auction for a company’s assets, and allows other potential suitors to make offers.
On Sept. 9, Furniture Brands filed for bankruptcy protection and said it favored a bid by Oaktree for $166 million. The offer included $140 million in financing, plus the assumption of other liabilities. But the bid did not include Lane.
In its petition, Furniture Brands said other unidentified buyers were interested in Lane and said it expected it to be sold within 30 days. However, Furniture Brands also notified the Mississippi Department of Employment Security that layoffs of Lane’s then 1,400 employees could begin around mid-October.
Not long after Oaktree’s initial bid, another firm, KPS Capital Partners, made a bigger offer for Furniture Brands – and its bid included the purchase of Lane.
A bidding war of sorts has since ensued, and the price tag has jumped.
In court documents, Furniture Brands said it favors Oaktree’s latest bid of $260 million. However, the unsecured creditors’ committee said it favors KPS’s even higher bid of $280 million.
Both of those bids include Lane, a hopeful sign for Lane employees.
Furniture Today said Oaktree’s bid “still leaves room for a Lane sale prior to Oaktree’s obtaining FBI’s assets.”
The industry magazine also said KPS is interested in the deal only if Lane continues operations.
The unsecured creditors committee favors the KPS offer, and said accepting the lower Oaktree bid was an “unsound decision.”
A Furniture Brands court filing Sept. 24 shows it estimates operating cash flow to continue through late January, when an auction for its assets is anticipated. But the filing also shows Lane’s contributions to end the week of Oct. 14. From the time of its Chapter 11 filing last month until then, Furniture Brands estimates Lane generating about $24.9 million in receipts. Its Broyhill, Thomasville and Designer Brands subsidiaries are shown contributing through Jan. 24.
Perhaps that’s why the creditors’ committee prefers KPS’ bid. In its proposal letter, KPS said Furniture Brands’ actions “have evidenced to Lane employees, customer and vendors the intention to liquidate Lane.”