Bankrupt furniture retailer Art Van Furniture, LLC has lost access to cash collateral and the buyer for 44 of its stores amid the economic fallout from the new coronavirus.
The news is the latest in a series of setbacks for the Midwestern furniture retailer, which filed for Chapter 11 protection earlier this month with plans to liquidate most of its 169 stores and sell the 44 Wolf and Levin branded stores as a going concern.
“The transaction, while it could be revived at some point in the future, is not going forward now,” Art Van’s attorney, Gregory W. Werkheiser of Benesch, Friedlander, Coplan & Aronoff LLP, said Tuesday at a status teleconference in the U.S. Bankruptcy Court for the District of Delaware.
The company got notice that the sale fell through just days after it was forced to abruptly shut down all going-out-of-business sales due to an increasing number of states mandating that nonessential businesses close down to prevent the spread of Covid-19, the disease caused by the virus.
Wells Fargo Bank, N.A., which provided the company’s debtor-in-possession financing, told Art Van March 19 that it would terminate access to most of the company’s cash collateral. The notice came less than two weeks after the company won interim approval for access to the working capital.
Art Van is still able to use some cash collateral for payroll, and is negotiating with lenders to try to find a path forward, Werkheiser told the court.
“The starkness and breadth of this economic disruption is like nothing I’ve seen in my lifetime,” Judge Christopher Sontchi said.
The former owner of Levin Furniture, Robert Levin, signed a letter of intent March 4 to buy all stores under the Levin and Wolf Furniture brands, Art Van’s chief financial officer David Ladd said in court documents filed when the company first filed for bankruptcy.
Keeping the stores open would have saved about 1,000 jobs, Ladd said at the time.
On top of the economic turmoil, two former employees sued the company Monday, saying that pre-petition store closings that started March 4, which put 700 employees out of work, didn’t provide a 60-day notice as required by the Worker Adjustment and Retraining Notification Act.
The case is Art Van Furniture LLC, Bankr. D. Del., No. 20-10553, Status conference 3/24/20
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