Berkline/BenchCraft files bankruptcy to finish liquidation of assets

By Caroline Salls

Pittsburgh, May 3 - Berkline/BenchCraft Holdings LLC filed Chapter 11 bankruptcy Monday in the U.S. Bankruptcy Court for the District of Delaware amid plans to liquidate its assets.

According to a statement filed by chief restructuring officer Keith Cooper, the company has not been able to generate enough cash flow to meet its continuing obligations, despite success in reducing its fixed costs.

After out-of-court restructuring efforts were unsuccessful, Cooper said Berkline/BenchCraft decided to file bankruptcy to liquidate its assets under bankruptcy court supervision.

In connection with its liquidation efforts, the company is seeking bankruptcy court approval to assume a liquidation agency agreement with Hilco Merchant Services.

Under that agreement, Hilco, which was high bidder at an auction held last week, will guarantee a minimum payment of $2.78 million in liquidation proceeds to Berkline/BenchCraft.

In connection with the bankruptcy filing, the company is seeking court approval to use the cash collateral of its pre-bankruptcy lenders to fund its operations while in bankruptcy, including payment of employee payroll and benefits, rent and utilities.

According to court documents, $140 million was outstanding under the company's second-lien term loan as of Monday, as well as $25.8 million under its second-lien revolving credit facility and $28.7 million under a second-lien liquidity facility.

In addition, Berkline/BenchCraft said $12.5 million of its unsecured subordinated notes were outstanding on the bankruptcy filing date. Substantially all of the notes are owned by non-debtor parent entities SCSF Furniture Group Holdings, LLC and SCSF Furniture (US), LLC and their affiliates.

The company's largest unsecured creditors are Zhejiang Ausen Industry Co. Ltd. of Zhejiang Province, China, with a $4.27 million trade claim and Haining Mengu Group Co. Ltd. of Hainingcity, China, with a $3.89 million trade claim.

Sun Capital owns a 91.56% equity stake in Berkline/BenchCraft.

Berkline/BenchCraft is a Morristown, Tenn.-based designer, innovator and manufacturer of residential upholstered furniture. The Chapter 11 case number is 11-11369.

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