UPDATE: Click on this analysis to read more on Lane’s uncertain future.
Now the speculation begins following Monday’s announcement of Furniture Brands International‘s Chapter 11 bankruptcy filing and its impact on Lane Furniture Industries in Northeast Mississippi.
Furniture Brands filed Chapter 11 for ALL of its divisions, including Action Transport, Lane Furniture Industries, Laneventure, Broyhill, Maitland-Smith, Thomasville, HDM Furniture Industries and other entities. Again, Lane is not excluded from the bankruptcy filing.
However, the investment firm providing financing during Chapter 11 and bidding on most of Furniture Brands assets, Oaktree Capital
Management, is not bidding on Lane. That could mean several things: Oaktree didn’t want Lane as part of the package or Furniture Brands didn’t want Lane part of the package for one reason or another.
There is hope that a buyer will come in and save the day for Lane, which could lay off as many as 1,451 people. Furniture Brands said there were potential buyers but didn’t identify them.
Furniture Brands also noted, as mentioned Monday, “a sale is not guaranteed and we are exploring our options for Lane at this time.”
So what is Furniture Brands telling employees? Below we’ve pasted the Q&A given to employees yesterday. It’s rather lengthy, and is a bit repetitive.
It should be noted that there may be other bidders other than Oaktree for Furniture Brands. And the company said workers will continue to be paid and receive benefits because of the financing it’s received. Just as importantly, vendors will be paid – providing the bankruptcy court approves the plan.
Furniture Brands also said it’s “business as usual” and employees should continue working as hard as they can, as usual, to make quality products.
Here’s the Q&A, after the jump. It’s rather lengthy:
FURNITURE BRANDS Q&A for EMPLOYEES 9/8/13
What is Chapter 11?
Chapter 11 is a legal mechanism that allows us to gain relief from creditors and strengthen our company, while continuing our day-to-day operations uninterrupted. Along with this filing, we are pursuing a sale process for most of our business under Section 363 of the Bankruptcy Code. Specifically, we have entered into an agreement with affiliates of funds managed by a strong new financial partner, Oaktree Capital Management L.P., who has made a bid to acquire our businesses (except the company’s Lane business). This bid will serve as a starting point for us to run a sale process for our company, which may include other bidders. Oaktree is a leading institutional investor with deep experience working with companies in situations similar to ours.
Ultimately, we expect to emerge from the process as a stronger, more competitive company, better positioned to grow and prosper into the future.
What does it mean to voluntarily file for Chapter 11?
A voluntary Chapter 11 filing – such as ours – is a decision made by a U.S. company to resolve financial challenges. During the Chapter 11 process, a company is able to continue to conduct business as usual while we gain relief from creditors and strengthen our company.
For us, during Chapter 11 we continue to provide employees with salaries and medical benefits. We will also continue to do business with suppliers and customers in a routine manner. Ultimately, we expect to emerge from the process as a stronger, more competitive company, better positioned to grow and prosper into the future.
Why did the company file Chapter 11?
As you are aware, the company has recently been facing many challenges, including having sufficient cash to operate successfully, grow our brands and best serve our customers. In light of this situation, management and the Board of Directors have reviewed a wide range of strategic options to strengthen our business. After careful consideration, we have decided to voluntarily file for Chapter 11 bankruptcy protection. By filing Chapter 11, we will be able to gain relief from creditors and strengthen our company, while addressing these challenges.
Is Furniture Brands going out of business?
No – not at all. We will continue to operate our business as usual during this process and we have agreements in place to provide cash to fund our operations throughout this process.
What will happen to the Lane furniture business?
At this time, there are several interested parties who have indicated interest in acquiring that business. However, a sale is not guaranteed and we are exploring our options for Lane at this time.
What happens during Chapter 11?
The Chapter 11 filing allows us to pursue a sale of our assets and gain relief from our creditors, while continuing to operate our business. Chapter 11 allows daily operations to continue – employees will be continue to be paid and receive benefits, and merchandise purchased after the Chapter 11 filing date will be paid for in a timely manner in the ordinary course of business.
What exactly is Section 363?
Section 363 enables us to run an auction process for our company, supervised by the Bankruptcy Court that will allow us to find the right partner to purchase our assets. If a sale is approved, this process provides for the sale free and clear of certain prior liens and claims.
What is a “stalking horse” bid? Does this mean Oaktree is acquiring Furniture Brands?
A “stalking horse” bid is an initial bid to purchase the assets of a company in Chapter 11.
What does Oaktree intend to do with the Company, if the bid is successful?
Oaktree’s goal is to ensure the long-term viability of the business and assets of Furniture Brands, so the company can continue to deliver high quality products and services to our customers, and will make business decisions accordingly. Oaktree is a leading institutional investor with deep experience working with companies in situations similar to ours.
How is Furniture Brands going to get the cash to stay in business?
Upon Court approval, $140 million in new financing – including $50 million of new liquidity – provided by an affiliate of Oaktree Capital Management, L.P. will provide adequate cash to fund operations during the Chapter 11 process.
How long will it be before Furniture Brands can emerge from Chapter 11?
We don’t know for sure, but management is doing everything in its power to complete the sale process as quickly as possible. We are hopeful the auction process and Court approval of a purchase agreement will be completed within 4-6 months.
Do companies ever emerge from Chapter 11?
Yes! Many companies, including such well-known companies as General Motors, United Airlines, the Los Angeles Dodgers, Texaco, Six Flags, Marvel and Macy’s have successfully emerged from Chapter 11. In the furniture industry, we have seen companies like Rowe take this action and emerge as a stronger company.
Is the company in control of its operations during bankruptcy?
Yes, the Furniture Brands management team will be running the day-to-day operations of the business.
How can I obtain more information?
You can obtain more information about this announcement from a number of resources:
- The Furniture Brands internet web site, www.furniturebrands.com, where we have added a special section with information on our Chapter 11 filing;
- The toll-free Restructuring Information Line: Domestic 877.797.6087International 503.597.7678
- Employees can find information and links on FBNet;
- For information on the Chapter 11 proceedings, including access to court documents, you can visit: http://dm.epiq11.com/FBN This web site is set up and maintained by our court- appointed claims agent, Epiq Bankruptcy Solutions, and will have general information about the Chapter 11 case and most of the documents filed with the court)
How will the filing affect our day-to-day operations?
It won’t. We expect to operate business as usual.
What should I say if customers ask about the Chapter 11 filing?
Tell them that the Chapter 11 filing will not affect our operations and our customers continue to be our highest priority. Say that we will continue to meet their needs and provide the same service and quality that they have come to expect. Our customer service departments will be open for business at the usual times.
What happens if customers don’t listen and want refunds on capacity or services they have ordered or purchased?
No matter what we say, some people will, at first, become nervous and want refunds. That’s fine – we intend to honor our normal refund policy.
Why is it necessary to restructure through the court?
There are two primary reasons: (1) to complete the sale process in an orderly environment; and (2) so that we can avail ourselves of debtor-in-possession financing to adequately fund operations.
Can we pay for goods and services we received before the filing?
No. Now that we’ve filed for Chapter 11, it is against the law to pay invoices for goods and services received before the filing, or pre-petition claims unless we receive court approval to make specific payments.
If a supplier calls you regarding a pre-petition claim, please refer them to Epiq, our claims agent. Do not authorize payment of any invoice about which you are uncertain.
An Epiq representative can be reached at: Domestic 877.797.6087; International 503.597.7678
Will we pay for goods and services received after the filing?
Yes. Invoices received after the filing will be paid as usual, as long as they are for goods or services received after the filing date of September 9, 2013. Invoices for goods and services received before the date on which the company filed should not be paid regardless of when the invoice is received, unless we receive court approval otherwise.
What should I do if a vendor tries to reclaim goods?
Some suppliers may try to reclaim goods in the belief that this will help to reduce their losses. In fact, taking back goods from a company that has filed Chapter 11 is against the law, unless ordered by the court. If a supplier tries to reclaim goods, you should call your immediate supervisor who has received instructions regarding how to deal with situations like this.
What should I do if a newspaper, magazine or television reporter contacts me?
Politely tell the reporter that all media inquiries are being handled by the company’s communications agency, ICR. Please keep in mind that reporters may attribute to you and the company anything you say, and misinformation only makes all of our jobs more difficult. It is extremely important that you not act as a spokesperson for the company. Please refer all media calls to Anton Nicholas or Phil Denning at ICR, 203.682.8200.
Will there be any layoffs or plant closings as a result of the filing?
The company will continue to look at all of our operations in the months ahead as part of an ongoing evaluation of our business. Decisions regarding operations will continue to be made on
the basis of what is in the best interests of the company. We will, of course, inform everyone of our progress as appropriate.
How will this affect my job?
We will continue to pay salaries and benefits as we always have. Decisions on employment levels, promotions and so forth will continue to be made on the basis of what is in the best interests of the company.
Will there be any impact on salary increases and opportunities for promotions?
Compensation and promotions will continue to be based upon the same criteria that we have always used.
How do I get my next expense reimbursement?
Processing for expenses will take place as usual.
Will there be any changes to my benefits?
Our various benefit programs (excluding pension plan) are part of the normal course of business, therefore, the filing will not affect them. Medical claims that were submitted before the filing will be presented to the court immediately for payment approval. The money you contribute to your 401(k) plan is held in trust, so it is safe, secure and protected by the law.
How about the Pension Plan?
If you have a pension with Furniture Brands, you may call an Epiq representative for your specific questions at:
Domestic 877.797.6087 International 503.597.7678
Can we still take planned vacation?
Allotted vacation time will not change, although – in accordance with existing company policy – vacation schedules must be approved by your manager.
What is going to happen to our stock?
It is not possible to predict what the ultimate value of Furniture Brands’ common stock may be or whether shareholders should expect any financial recovery in the Chapter 11 proceedings. Please contact your professional investment advisor for further information and guidance.
What is the next step in the process?
As a next step in the process, and subject to Court approval, the Company will run an auction process to see if there are any other interested bidders. Meanwhile, our operations will continue uninterrupted.
How will we be kept informed about our progress?
We will communicate with employees through memos and meetings.
With whom may I speak if I have additional questions?
Speak first with your direct manager. If you still need help, your manager can direct your question to the appropriate person.