United Furniture Industries’ lenders claimed in court filings that they were blindsided by the corporate’s pre-Thanksgiving move to suddenly lay off 2,700 employees in the course of the night – revealing for the primary time a bizarre sequence of events that sparked an unexpected bloodbath.
The November 21 layoffs – wherein employees learned they were losing their jobs resulting from an overnight explosion of emails and text messages – got here just hours after the Mississippi company allegedly requested “immediate substantial capital” from its lender Wells Fargo, signaling that it cannot proceed operations without money, creditors argued in a court filing late last week.
Wells Fargo – together with two other creditors asking a U.S. bankruptcy judge to force United Furniture into Chapter 7 liquidation – has objected to the request “at such short notice” and “without additional information” that the bank would require, corresponding to a restructuring budget and approval by an internal credit committee, in response to court documents.
Wells Fargo claims in a lawsuit that it owes it greater than $99 million. He didn’t specify the quantity sought, but said it was “over” what his line of credit, which was approved last summer for $130 million backed by company assets, would allow.
Later that day, UFI’s management allegedly told Wells Fargo that it will “immediately stop operations and lay off all of its employees with immediate effect,” in response to a December 31 lawsuit. In the method, the corporate allegedly “completely abandoned” all of its properties, leaving all 15 properties unsecured and uninsured after November 30, in response to records.
In line with court documents, some owners have closed their facilities and denied access to anyone.
When Wells Fargo contacted UFI, they were told that every one of the corporate’s officers had resigned apart from the CEO and CFO. A day later, in addition they resigned, in response to the file.
In search of to contain 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 became “overwhelming” as other creditors swarmed to make claims, in response to court documents.
“Wells Fargo has no responsibilities to such creditors and has been ordered to proceed ad hoc without using the institutional expertise of 2,700 former UFI employees to handle these claims,” the bank complained within the filing.
Since filing a lawsuit over the weekend, creditors said UFI appeared to have “no employees, management or officers”. All that’s left is a board led by UFI owner and chairman David Belford, who owns 90% of the corporate.
Belford, a wealthy Ohio businessman who remained silent for 3 weeks after the layoffs, finally addressed the disaster in an interview with the Columbus newspaper, calling himself a “passive investor” and adding that his “insight into the corporate’s funds was limited.”
“Only recently did I find out how dire the situation had turn into and the way limited the corporate’s capability was” said Columbus Business First December 12. “Unfortunately, the truth of UFI’s situation was dropped at the eye of the board much too late.”
Former UFI chairman and board member Larry George – who can also be listed as a board member within the December 31 filing – disputed the filing’s claim to be a 5 per cent shareholder, in addition to describing himself as a “passive investor”. “
Belford “was all the time quite aware of 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 met once a month to debate funds,” said George. “David attended monthly board meetings in person or via teleconference.”
Doug Hanby, also named within the filing as a board member, also disputed the filing’s claim that he was still on the board and that he owned 5% of the corporate, saying he also left last summer.
Wells Fargo said it got its information from loan documents.
Fewer than 5% of firms that file for bankruptcy achieve this reluctantly or on the behest of their creditors, in response to distressed debt expert Adam Stein-Sapir.
“If the case is involuntarily, it makes the corporate look guilty and puts it in a worse light,” said Stein-Sapir.
“The thought of a debtor waiving collateral is shocking,” added bankruptcy attorney Kenneth Rosen. “It’s remarkable that a debtor in such a serious situation wouldn’t be coordinating with their senior lender long before closure.”
UFI and Belford didn’t reply to requests for comment.