Lenders to United Furniture Industries claimed in court filings they were blindsided by the corporate’s pre-Thanksgiving move to abruptly fire its 2,700 employees in the midst of the night — revealing for the primary time a bizarre sequence of events that triggered the surprise bloodbath.
The Nov. 21 layoffs — during which employees learned they were losing their jobs through a late-night blast of email and text messages — took place just hours after the Mississippi-based company allegedly demanded “substantial capital immediately” from its lender Wells Fargo, signaling that it couldn’t proceed operations without the money, creditors claimed in a court filing late last week.
Wells Fargo — together with two other creditors is asking a US bankruptcy judge to force United Furniture right into a Chapter 7 liquidation — balked on the request “on such short notice” and “without additional information” the bank would require, corresponding to a restructuring budget and approval from its internal credit committee, based on court papers.
Wells Fargo and two other creditors are asking a US bankruptcy judge to force United Furniture right into a Chapter 7 liquidation.WXII
Wells Fargo claims within the court petition it’s now owed greater than $99 million. It didn’t specify the quantity requested, but said it was “over and above” what its credit facility allowed, which had been approved last summer for $130 million secured by the corporate’s assets.
Later that day, UFI’s management allegedly told Wells Fargo that it could “immediately stop operations and lay off all of its employees effective immediately,” based on the Dec. 31 court filing. In the method, the corporate allegedly “completely abandoned” all of its properties, leaving all of its 15 facilities without security and without insurance coverage after Nov. 30, based on the filing.
Some landlords locked up their facilities and denied access to anyone, based on court papers.
When Wells Fargo reached out to UFI, it was told that every one of the corporate’s officers had resigned except the CEO and CFO. A day later, they too resigned, based on the filing.
The layoffs took place just hours after the corporate allegedly demanded “substantial capital immediately” from Wells Fargo.United Furniture Industries
Trying to rein within the chaos, Wells Fargo said it hired a crisis-management firm called Focus Management Group to secure UFI’s properties and start an orderly liquidation. Nevertheless, the method has develop into “overwhelming” as other creditors have swarmed in to make claims, based on court papers.
“Wells Fargo has no duties to such creditors and has been required to proceed on an ad hoc basis without having the advantage of the institutional knowledge of the two,700 former employees of UFI to deal with these claims,” the bank griped within the filing.
As of the court filing over the weekend, the creditors said UFI appears to have “no employees, management or officers.” All that’s left, the filing said, is a board led by UFI’s owner and chairman, David Belford, who owns 90% of the corporate.
David Belford is the chairman and largest shareholder of the furniture manufacturer.Flying Horse Farm
Belford, a wealthy Ohio businessman who remained silent for 3 weeks following the layoffs, finally addressed the disaster in an interview with a Columbus newspaper, calling himself “a passive investor” and adding that his “insight into the corporate’s funds was limited.”
“Only very recently did I learn just how dire the situation had develop into, how limited the corporate’s options were,” he told Columbus Business First on Dec. 12. “Unfortunately, the fact of UFI’s circumstances was delivered to the board’s attention far too late.”
UFI’s former president and board member, Larry George — who can also be listed as a board member within the Dec. 31 filing — disputed the filing’s claim that he’s a 5% shareholder, in addition to Belford’s description of himself as a “passive investor.”
UFI employees were informed overnight via texts and emails that they’d been laid off.
Belford “was all the time pretty aware of the what was occurring,” said George, who said he co-founded the corporate and was its president until 2020 and a director until June 2022.
“We had board meetings every quarter and we’d meet once a month to debate the financials,” George said. “David either attended the monthly board meetings in person or via conference calls.”
Doug Hanby, also listed within the filing as a board member, also disputed the filing’s claim that he was still on the board and that he owned a 5% stake in the corporate, saying he also exited last summer.
Wells Fargo said it drew its information from loan documents.
Toria Neal worked for UFI in considered one of its Mississippi based facilities.Kenzie Neal
Lower than 5% of firms that file for bankruptcy achieve this unwillingly or on the behest of their creditors, based on distressed debt expert, Adam Stein-Sapir.
“If the case proceeds on an involuntary basis it makes the corporate look culpable and puts it in a worse light,” Stein-Sapir said.
“The thought of the collateral being abandoned by the debtor is shocking,” bankruptcy attorney Kenneth Rosen added. “It’s remarkable that a debtor in such severe distress wouldn’t have been coordinating with its senior lender, long upfront before a shutdown.”
UFI and Belford didn’t return calls for comment.