Oaktree agrees to purchase Furniture Brands

Oaktree Capital Management has agreed to purchase the assets of Furniture Brands International through bankruptcy, according to a statement released by the company Monday. The aggregate purchase price will be $166 million in the form of the credit bid and cash, plus the assumption of the assumed liabilities, according to a bankruptcy filing.

The furniture design and manufacturing company announced that it had filed bankruptcy under Chapter 11 of the US Bankruptcy Code on Monday. Oaktree will acquire all of the company’s assets except its Lane business through a Court-supervised auction process.

Oaktree has also committed to providing the company with $140 million in debtor-in-possession financing, which includes $50 million of new liquidity. The new facility will allow the company to continue to operate and remains subject to court approval.

“We are pleased to be partnering with Oaktree, which has deep experience working with Furniture Brands  and other companies in our industry,” chairman and chief executive officer Ralph Scozzafava said in a statement. “We firmly believe that our Chapter 11 process represents the best long-term solution for Furniture Brands to address its liquidity challenges.”

As of 9 September, Furniture Brands International had approximately $142 million of total debt outstanding, which includes $49.7 owed through a term loan facility and $92.3 million owed through an asset based revolving facility.

The company cited ongoing weaknesses in the US home sales and construction markets, in addition to declines in consumer discretionary spending, as a key factor contributing to its bankruptcy.

“Sales have continued  to be depressed as a result of a sluggish recovery in the US economy, continuing high unemployment, depressed housing prices, tight consumer lending practices, the reluctance of some households to use available credit for big ticket purchases including furniture, and continuing volatility in the retail market,” according to the filing.

Sales had fallen 7.8 percent for the six month period ending 29 June compared to the same period in 2012. The decline in sales affected the company’s ability to borrow under its ABL facility – the company’s most significant source of liquidity alongside cash generated from working capital.