Struggling Home Depot rival files for Chapter 11 bankruptcy
According to The Street, The home improvement retail sector has been grappling with economic difficulties over the past two years, largely due to the effects of inflation, high interest rates, and the aftermath of the Covid-19 pandemic. During the pandemic’s stay-at-home phase, home improvement projects saw a significant uptick as people spent more time at home and sought to renovate or repair their living spaces. However, as the pandemic subsided and normalcy resumed, the temporary boost in demand for home improvement began to wane, leaving many companies struggling with financial challenges.
Kelly-Moore Paints Shuts Down
The pandemic’s impact has been particularly severe for some companies, such as historic paint retailer Kelly-Moore Paints. In January 2024, the company, founded in 1946 and based in Irving, Texas, closed all 157 of its retail locations and furloughed approximately 700 employees. The decision to wind down operations was driven by the heavy financial burden of approximately $600 million in asbestos claims settlements, ongoing risks of future asbestos claims, and unresolved supply chain issues exacerbated by the pandemic. Kelly-Moore opted for an out-of-court wind-down rather than filing for Chapter 11 or Chapter 7 bankruptcy due to insufficient capital to sustain its operations.
Also read: SNAP CHECK COMING: SNAP Payments Up to $535 This September – Full List States Food Stamps
LL Flooring Files for Chapter 11 Bankruptcy
Another major player in the home improvement sector, LL Flooring, filed for Chapter 11 bankruptcy protection on August 11, 2024, in the U.S. Bankruptcy Court for the District of Delaware in Wilmington. The company, which is seeking to sell its assets, has been significantly affected by the post-pandemic downturn in the housing, repair, and remodeling markets. As part of its bankruptcy proceedings, LL Flooring has also filed a motion to close and liquidate 94 of its 442 stores nationwide.
According to a declaration from Chief Restructuring Officer Holly Etlin of AlixPartners, LL Flooring’s financial difficulties stem from constrained liquidity and unsuccessful attempts to sell its Sandston, Virginia distribution center. The company had also sought a buyer for the entire business but decided that bankruptcy was the most viable option for facilitating a sale as a going concern. If a buyer is not found during the bankruptcy process, LL Flooring may proceed with selling its assets and liquidating its retail stores.
The company listed assets ranging from $500 million to $1 billion and liabilities between $100 million and $500 million in its bankruptcy petition. This includes $109.6 million in total funded debt, with $99 million owed under a prepetition asset-based lending facility and $10.6 million in letters of credit. LL Flooring is seeking $130 million in debtor-in-possession financing, which includes a $12 million letter of credit sub-facility and a rollup of $10.6 million in prepetition letters of credit, from DIP lenders Bank of America (BAC) and Wells Fargo Bank (WFC).
Also read: Another troubled drugstore chain files for Chapter 11 bankruptcy
Founded in 1994 as Lumber Liquidators by building contractor Tom Sullivan, LL Flooring rebranded as LL Flooring Holdings on January 1, 2022, following a $33 million settlement for securities fraud allegations. As of April 2024, the company was ranked as the top U.S. hardwood flooring retailer by U.S. News and World Report, operating approximately 442 locations across 46 states.
