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Warren — On the first official day of Art Van Furniture's bankruptcy, the business to be in was truck rentals.

The 61-year-old furniture and mattress retailer filed for Chapter 11 bankruptcy Sunday night in Delaware, three days after it launched liquidation sales at most of its 190 stores. 

Monday afternoon, the widespread grounds of its furniture store, corporate office and warehouse on 14 Mile in Warren looked like a U-Haul lot as customers — some bargain hunters, some trying to salvage investments they had made weeks ago — waited for hours to pick up their merchandise.

Dozens of rental trucks joined pickups, SUVs and one red Mazda3 subcompact in an afternoon throng of more than 300 vehicles, inching toward a loading dock beyond a gate manned by uniformed security guards.

At the end of the orderly, if mysteriously organized, queue, at 4:30 p.m., Rich Laviolette of Durand idled in a full-sized truck he'd paid $100 to use for the day. His daughter had paid $4,800 for a bedroom set and a sofa bed three weeks ago, and the newly bankrupt Art Van is offering no refunds and no deliveries.

"They told me it's six hours from right here," said Laviolette, 51, who was due to clock in at GM's Flint Truck and Bus at 10:30 p.m. "But they're supposed to close in 2½ hours."

From high in the cab, he shrugged: if the warehouse turned out the lights before his turn, "I might even call off work and stay the night."

More: 'Heartbroken,' 'angry': Art Van closing shocks customers, city leaders

On its newly bare-bones website, www.artvan.com, the company had said Monday that its Art Van Furniture and freestanding PureSleep stores would be reopened to customers from 2-7 p.m. Monday, and then Tuesday through Sunday from 10 a.m. to 7 p.m.

The company's liquidation sale began Friday, but large crowds and angry customers — particularly at the flagship store and warehouse in Warren, where police ordered a shutdown — prompted an early Saturday closing.

The customer service line, (888) 427-8826, has been largely impenetrable since late last week. The company suggested that questions be directed there from 9 a.m.-6:30 p.m. Monday through Friday, 9 a.m.-2:30 p.m. Saturday, and noon-5 p.m. Sunday.

The Detroit News reported Friday that warranties purchased by customers are likely rendered worthless by the bankruptcy.

Requests for deposit refunds, Art Van's website said Monday, "will be given as a store credit. There is no cash in store." That means customers must select something already in stock.

Customers may wait until after the liquidation for a potential refund, the company said, but "a cash refund cannot be guaranteed if you choose to do so."

Loan default

The sudden decline of the company founded by Art Van Elslander in 1959 with one store has angered observers such as Warren Mayor Jim Fouts, who pinned its collapse on "investment greed." 

"This did not have to happen. This was a successful company," Fouts said Thursday. Warren has come to rely on the $2 million-plus in taxes it receives from Art Van annually.

The Van Elslander family sold the chain in 2017 to Boston-based private equity firm Thomas H. Lee Partners.

The bankruptcy filing contains a list of Art Van's 30 biggest unsecured creditors that are owed more than $60 million. Largest among them is the Sussman Agency, a Southfield-based advertising firm owed more than $7.8 million. Monroe-based La-Z-Boy Chair Co. is owed nearly $5.2 million.

In a declaration in support of the filing, David Ladd, Art Van's chief financial officer, wrote: "Given continuously declining profitability and operational challenges over the past three years, and despite the best efforts of the company and its advisors to secure the capital necessary to preserve the entire business as a going concern, the company is simply unable to meet its financial obligations."

Ladd's 32-page declaration reveals some details of Art Van's decline, challenges of finance, strategy and leadership, and a pattern of expansions or acquisitions that proved unprofitable. The company's sale to the private equity firm included the sale and leaseback of Art Van's real estate portfolio. 

"Proceeds from the sale-leaseback transaction were used to fund the purchase price paid to the selling shareholders," and similar transactions took place when Art Van acquired Levin Furniture and Wolf Furniture later in 2017, the bankruptcy filing said.

Art Van's same-store sales have declined every quarter since June 2016, Ladd wrote. Beyond that, "increased fragmentation and intense competition" on both the digital front, from Amazon, and in retail, from stores like Ashley, hurt the company.

Art Van faced a number of "operational challenges" as well, Ladd wrote, from a failed expansion into the Chicago market, to seeing eight of its top nine leaders depart in 2017 and 2018.

A November 2019 adjustment to Art Van's asset-backed loan with Wells Fargo increased its credit line from $60 million to $82.5 million. That loan would lead to the unraveling of the company through liquidation and, now, bankruptcy.

Just two months after its credit line was increased, Ladd wrote, certain financial partners of the company began to demand additional collateral and tightened access to credit as a result of the company's weak financial results. Those included credit card processing companies "critical to the company's ability to accept credit cards in stores and online."

The company went into default on the Wells Fargo loan and started plans for a going-out-of-business sale "to preserve value."

More: Art Van stores to 'regroup,' remain closed until Monday afternoon

End of the line

Donald Thurmond of Ferndale had been assured that the kitchen table and chairs he and his wife bought on markdown at the Warren store Saturday could be collected the next afternoon. Instead, the facility was closed, meaning he'd wasted a $30 rental fee for a van and had to come back Monday at a higher rate.

His furniture had seemed like a bargain at $320. Waiting in one of multiple diagonal rows for his turn to pull into a long, looping line, he reevaluated: "It really makes the cost of that table set go up."

The few customers in the showroom Monday afternoon were outnumbered by staffers, perhaps because it was an ordeal just to reach the parking lot: traversing the two-fifths of a mile from Mound Road east on 14 Mile took 20 minutes.

Sales were made, however. The driver of the Mazda3, a dental hygienist from Oak Park, paid $159 for a $200 chandelier. She said she had been given three days to pick it up, and there were no refunds. So more than two hours into the line, she was focusing on how nice it would look in her house.

Victor and Kathy Juengel weathered hours in their white Chevy Silverado to pick up the layaway their daughter had hurriedly paid off after the announcement of the liquidation.

"What are you going to do?" asked Victor from behind the wheel of his muscular pickup. "We're powerless."

Kathy said she was sad about what was happening to the business. Art Van Elslander, she said, "is probably rolling in his grave."

Slowly.

nrubin@detroitnews.com

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