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Utilities want nearly $1M in deposits from Furniture Brands

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Duke Energy Carolinas and Piedmont Natural Gas requested Monday that Furniture Brands International Inc. be required to put down a two-month deposit for its utility costs as part of exiting Chapter 11 bankruptcy protection.

Duke Energy said in a filing it wants a combined deposit of $663,740 made for its 63 accounts with Furniture Brands, while Piedmont wants a combined $219,466 for its 36 accounts.

Altogether, eight East Coast-based utilities want a combined $949,205 in deposits for Furniture Brands, which entered bankruptcy Sept. 9. The other utilities have a combined 13 accounts.

Furniture Brands said in its bankruptcy petition it wants court approval to establish a new bank account from which to pay ongoing costs, such as utility bills. The account would contain funds for two weeks’ worth of utilities charges at any time, according to the utilities.

“It is unclear from the budget whether the debtors have budgeted sufficient funds for the timely payment of their post-petition utility charges” even though Furniture Brands says an uninterrupted supply of utility services is critical to its operations, according to the utilities’ complaint.

On Sept. 12, Furniture Brands said a judge had approved giving it immediate access to $25 million in funding from Oaktree Capital Management LP.

The $25 million will allow Furniture Brands “to operate business uninterrupted and continue to meet its post-petition financial obligations, including the payment of employee wages and benefits, timely payment of supplier invoices, continued servicing of customer orders and shipments, and other obligations,” the company stated.

The company’s petition requires it to put $852,000 into the bank account, with nearly $98,000 designated for utilities that are not parties to Monday’s complaint.

The utilities said that the bank-account proposal “is unacceptable and should not be considered relevant by this court because … it does not allow the debtors to establish the form or amount of adequate assurance of payment.”

Furniture Brands entered bankruptcy with $550 million in liabilities and $547 million in assets. It has a $200 million unfunded obligation to its pension plan and $100 million in general trade obligations.

The company has about 20,000 pension-plan participants, many of whom live in the Triad and Hickory areas. The federal Pension Benefits Guaranty Corp. is listed as Furniture Brands’ largest unsecured creditor.

Furniture Brands said the private-equity group led by Oaktree is requesting permission to provide $140 million in debtor-in-possession financing. In return, Furniture Brands would sell all of its businesses, excluding Lane Furniture, to Oaktree.

A hearing has been set for Oct. 2 to determine the auction bidding procedures. The Wall Street Journal reported that KPS Capital Partners has emerged as another bidder. KPS officials said they would want the Lane division as well.

The utilities said the debtor-in-possession loans are projected to last Furniture Brands through Jan. 24, around the potential timeframe for the auction of Furniture Brands’ assets.

The debtors have asked for approval to pay $1 million for fees and expenses of their attorneys.

“Unlike the debtors’ professionals’ carve-out, the bank account may not remain if the debtors default on their post-petition financing,” the utilities stated. “Debtors’ counsel, who has access to inside information regarding the debtors operations, is not taking any changes regarding the payment of their post-petition charges.”

Furniture Brands was in the early 2000s the largest U.S. furniture manufacturer at $2.2 billion in annual sales, primarily from divisions Broyhill Furniture Industries Inc., HDM Furniture Industries Inc. and Thomasville Furniture Industries Inc.

However, it had seen eight years of revenue declines, according to John Baugh, an analyst with Stifel Nicolaus.

In the past 12 years, Furniture Brands has eliminated at least 8,860 jobs in North Carolina, including at least 2,874 in the Triad, in pursuit of lower labor costs in Asia that have not contributed to increased sales.

By Richard Craver/The Winston-Salem Journal