Home improvement retail chains benefitted from increased business during the Covid-19 pandemic, but many faced a financial downturn when the pandemic faded away.
Consumers stuck at home while stay-at-home orders were in place kept busy with home improvement projects and renovations. This was good news for home improvement retailers and provided economic relief for retail establishments struggling before the pandemic.
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Once businesses began opening up after the pandemic and people began returning to brick-and-mortar establishments and their places of employment, people had less free time for those home improvement projects.
A decrease in demand for home improvement products, along with inflation and high interest rates, created financial hardship for some home improvement retail establishments, forcing them to file bankruptcy to reorganize their businesses or liquidate and close stores.
Home improvement chain liquidations and closings are not a common occurrence, but there have been some in recent years.
Historic paint retailer Kelly-Moore Paints shut down all 157 of its retail locations and furloughed about 700 employees in January 2024 in an out-of-court wind-down of all its business operations. The company could not withstand the financial burden of future asbestos claims after paying off about $600 million in claims.
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Another major home improvement retailer, LL Flooring, filed for Chapter 11 bankruptcy protection on Aug. 11 in the U.S. Bankruptcy Court for the District of Delaware in Wilmington, seeking a sale of its assets after suffering from broad headwinds in the housing, repair, and remodeling markets that occurred when the Covid-19 pandemic subsided.
The company hoped to sell all of its assets in a Section 363 bankruptcy sale but opted to close and liquidate over 400 store locations in 47 states after two stalking-horse bid proposals fell through when the debtor rejected bids from F9 Investments and Issac Capital Group as being inadequate.
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Negotiations continued and within days, the debtor sealed an agreement with one of the bidders.
Bankrupt home improvement retail chain LL Flooring has reversed course from liquidating and closing all of its stores and agreed to a sale of its assets and distribution center to a subsidiary of private equity firm F9 Investments for a purchase price including a $1 million fixed amount, an inventory price of 57% of landed cost value of acquired inventory and assumed cure costs.
F9’s subsidiary F9 Brands on Sept. 5 reached an agreement with the debtors, the official committee of unsecured creditors, and the debtor-in-possession asset-based loan lenders on an asset purchase agreement and filed the agreement in the District of Delaware on Sept. 6.
The debtor agreed with the buyer’s terms after F9 increased its bid for inventory; set an acceptable value for furniture, fixtures, and equipment; and assumed certain liabilities, cure costs, store leases, and employee obligations.
Under terms of the purchase, the buyer is supporting the employment of up to 1,000 workers, offered to acquire up to 219 stores and LL Flooring’s Sandston, Va., distribution center and will continue to operate as a going concern, according to F9 statement on Sept. 10.
LL Flooring will still close about 211 stores, which have already begun liquidating.
The parties have scheduled a sale hearing for Sept. 16 with Judge Brendan L. Shannon to consider approval of the transaction, which could close by the end of September.
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