Plan for Furniture Brands' debt set for vote

Jun. 01, 2014 @ 09:01 AM

Most of the people and companies who are still owed money by the former Furniture Brands International will get less than 10 cents of every dollar they are owed, according to the liquidation plan that a U.S. Bankruptcy Court judge approved Thursday to be mailed to creditors.

Claims against Furniture Brands awaiting resolution in U.S. Bankruptcy Court in Delaware total more than $1.9 billion, the document shows.

But when the last of the company’s assets are liquidated, there likely will be no more than $72.2 million to be distributed to those creditors.

Those amounts do not include the company’s unfunded pension obligations, which the U.S. Pension Benefit Guaranty Corp. says is $340 million.

Most of Furniture Brands’ assets sold last November for $280 million to KPS Capital Partners. KPS formed Home Heritage Group to take over those assets.

Once the remaining assets are liquidated, the PBGC, which has assumed the pension obligations, is first in line for payment and will take $300 million.

Three small classes of creditors who are owed a total of $2.8 million will collect 100 percent of what they are owed. That includes delinquent tax debts.

Among all other classes of creditors, it is not likely that anyone will collect more than 15 percent of what was owed by Furniture Brands or any of its subsidiaries.

But 95 percent of the claims fall into the categories of unsecured claims, and the amount those creditors are likely to recover varies according to which subsidiary owed them the money.

The liquidation plan’s estimated range of recovery for unsecured claims goes from a low of 3.4 to 4.5 percent, for claims against Furniture Brands’ logistical and transportation subsidiary, to a high of 9.9 to 13.9 percent, for claims against the subsidiary that made, sold and transported Drexel Heritage, Henredon, Pearson, Hickory Chair and Maitland-Smith products.

Those with unsecured claims against Broyhill Furniture are expected to recover 4.5 to 6.2 percent of the debt, and those with unsecured claims against Thomasville Furniture are expected to recover 5.3 to 7.2 percent.

Most creditors are being asked to vote on whether to accept the liquidation plan. At least 50.1 percent approval is needed.

If the plan is approved, any creditor who voted against it will not be paid – which would boost the amount that the others creditors receive.

For instance, if only 50.1 percent of the creditors approve the plan, those with unsecured claims against Broyhill could recover as much as 10.4 percent of the debt, and those with claims against Thomasville could recover up to 11.3 percent.

Votes are due by July 3. The Bankruptcy Court has scheduled a hearing on the vote results July 14.