Loves Furniture files for bankruptcy
Loves Furniture, just months after acquiring more than two dozen former Art Van Furniture stores, has filed for Chapter 11 bankruptcy as part of a bid to salvage the business amid financial struggles.
The Wednesday filing comes as several other signs of financial trouble emerge for the company, which is owned by Dallas-based private equity firm U.S. Assets Inc. The news was first reported by Crain's Detroit Business.
"What we hope to do is to turn what we have, which is excessive inventory, into cash to best satisfy the parties and interests to our case — our creditors, our customers, every other stakeholder in the case," Max Newman, an attorney with Detroit-based law firm Butzel Long who is representing Loves in the case, told The Detroit News Thursday.
In just one sign of the company's troubles, a supplier recently filed a lawsuit against Loves and U.S. Assets in the U.S. District Court for the Eastern District of Michigan, claiming Loves owed it nearly $2 million in unpaid bills.
The Dec. 31 filing by Mississippi-based furniture maker Southern Motion Inc. and subsidiary Fusion Furniture Inc. alleges breach of contract by Loves and U.S. Assets over what the plaintiffs say is more than $1.8 million in unpaid merchandise.
Meanwhile, Loves last month announced a "consolidation plan" under which it planned to close 13 locations, including 10 stores in Michigan, amid what the company's CEO described as challenges brought on by the pandemic and a furniture shortage.
Those 13 stores, Newman said, are now doing going-out-of-business sales organized by a Connecticut-based company called Planning Furniture Promotions, which assists furniture stores with liquidation.
"We are going to be seeking, relatively soon, authority to put the other 12 stores through sales as well," Newman said. "In doing so, we're hoping to maximize the value of all of our inventory, do the best that we can to satisfy customers, and if the sales are very successful, to have enough cash to be able to reopen 12 stores at the end of the entire process."
Primary among the fledgling company's challenges, according to Newman, were logistics snafus and higher-than-expected expenses after acquiring the Art Van locations: "We're planning on expanding further, accumulated a lot of inventory, and the logistics of being able to get the inventory to willing customers is really where things hit a snag."
Newman said he was unable at this point to specify the amount of debt Loves is carrying, but Wednesday's filing estimates Loves' number of creditors at between 100 and 199, and its estimated assets and liabilities as between about $10 million and $50 million each. The filing was signed by CEO Mack Peters, who just joined the company last month.
The filing as of Thursday did not include a list of creditors, though the court docket for the case — assigned to Judge Thomas J. Tucker of the U.S. Bankruptcy Court for the Eastern District of Michigan Southern Division — identifies mattress manufacturer Tempur Sealy International, Inc. as a creditor.
The Warren-based company had just opened its first locations last year after an entity tied to U.S. Assets acquired, for $6.9 million, the inventory and assets of more than two dozen former Art Van stores amid that retailer's bankruptcy case.
Art Van, which dated back to its 1959 founding in Michigan, grew to nearly 200 stores across multiple stores, but permanently shuttered last year, just three years after the chain sold to Boston-based private equity firm Thomas H. Lee Partners.