New details have emerged in recent court filings about United Furniture Industries’ financial health leading up to the company’s abrupt decision to cease operations two days before Thanksgiving.
Besides filing a petition Friday to force Mississippi-based United Furniture and its 10 affiliates into Chapter 7 bankruptcy proceedings, Wells Fargo Bank submitted a 377-page emergency motion seeking the appointment of an interim trustee.
In its motion, Wells Fargo asserts that UFI management contacted the bank “with little prior notice” on Nov. 21 — the same day the furniture manufacturer shuttered operations — advising the bank that it needed “substantial capital immediately” or it would not be able to fund continued operations.
“Wells Fargo advised UFI’s management that it could not agree to the request for additional funding on such short notice without additional information, including a budget for restructuring purposes and internal credit committee approval,” according to the emergency motion.
Later that day, United Furniture’s management advised Wells Fargo that it had decided “to immediately cease operations and lay off all of its employees effective immediately,” according to court documents.
Citing “unforeseen business circumstances,” United Furniture’s management fired more than 2,700 employees and truck drivers either by email or text late Monday, notifying them not to report to work on Tuesday.
UFI’s ‘disorderly closure’
Wells Fargo claims in the lengthy emergency motion that United Furniture owes it more than $99 million in secured debt, excluding interest, fees and expenses. The bank also outlines why it, along with two creditors, filed the involuntary Chapter 7 petition in U.S. Bankruptcy Court for the Northern District of Mississippi.
“The abrupt shutdown of United Furniture Industries, Inc. (‘UFI’) by company owners has adversely affected thousands of UFI’s employees, vendors, customers, and creditors,” Wells Fargo said in a statement. “Wells Fargo has been diligently working to help those impacted by UFI’s disorderly closure. After analyzing all possible options, we have determined the best way to proceed is through an organized and formal court process to properly handle all issues that have come to light after the company’s decision to close its doors. Our hope is that with court supervision, everyone impacted will be treated fairly.”
The court filing states that Wells Fargo entered into a credit agreement to provide a revolving credit facility of up to $130 million to United Furniture and its related entities in January 2021. The agreement had been amended four times — March 8, 2021, Jan. 31, 2022, June 30, 2022, and July 1, 2022 — over a two-year period.
A source familiar with the furniture manufacturer’s abrupt closure said company owner David Belford had rehired United Furniture’s former controller, Kimberly Harper, as CFO to help with the company’s wind down. In early December, Belford, who also serves as chairman of the board of directors, also hired Chicago-based attorney Mark S. Melickian of Sugar Felsenthal Grais & Helsinger to assist UFI’s lenders in liquidating assets. Melickian leads the firm’s restructuring, insolvency and special situations practice group, according to its website.
As of publication, Harper and Melickian had not responded to FreightWaves’ repeated requests seeking comment.
Wells Fargo: Forcing UFI into bankruptcy is necessary
In its motion, Wells Fargo claims the move to force United Furniture into bankruptcy is necessary after the bank was forced to step in after the furniture company ceased operations to preserve its collateral and make the liquidation process more orderly. Wells Fargo states that all of UFI’s officers and executive team resigned over a two-day period after the mass firing of workers at its facilities in Mississippi, North Carolina and California.
UFI Transportation, the company’s over-the-road division, relied on backhauls of brokered freight as a revenue source after making furniture deliveries across the U.S.
Truckers were instructed to “immediately return equipment, inventory and delivery documents” to the furniture company’s facilities in Winston-Salem, North Carolina, Verona, Mississippi, or Victorville, California. However, some freight that was still on trucks was left at UFI’s 12 other locations.
At that time, United Furniture also abandoned all 24 of its properties, leaving the sites without security to guard customers’ freight and without insurance coverage, which forced Wells Fargo to step in to “preserve its collateral and maintain some order in liquidating UFI.”
Five weeks after the furniture company shut down, frustrated brokerages and trucking companies still haven’t been able to retrieve their goods, including 53-foot trailers full of inventory, that remain impounded at UFI facilities.
In its four-page petition filed Friday in the U.S. Bankruptcy Court for the Northern District of Mississippi, Wells Fargo claims United Furniture is “generally not paying its debts as they become due” and that the bank is owed approximately $20,000 for revolving credit facility claims. Other petitioners listed in the bare-bones filing are Security Associates of Mississippi/Alabama LLC, owed $265,000 for unpaid services, and V&B International Inc. of Port Gibson, Mississippi, owed more than $30,000 for purchase orders.
The petition lists 14 other creditors but doesn’t provide a monetary range for UFI’s assets and liabilities.
A hearing on the petition and emergency motion seeking to appoint an interim trustee is set for Friday.
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DLE
Shame on Wells Fargo for not seeing the writing on the wall…..4 amendments in 18 months is the first red flag….the last 2 amendments in 72 hours should have been the stop sign something wasn’t right. Another 90+ days went by and all of a sudden an immediate shut down. Greedy executives, wasteful spending and an “unbalanced” balance sheet will always have bad results!!! Those poor people, the 2700, who lost their jobs right as the holidays were hitting put a lot of trust in the C suite folks, who gambled with families and lives and dropped the ball. Pretty sure all of them have nice fat bank accounts and not one worry on how to provide for their families….smh