ABC Carpet & Home files Chapter 11 with stalking horse bid from lender

By Sarah Lizee

Olympia, Wash., Sept. 9 – ABC Carpet Co., Inc., which does business as ABC Carpet & Home, filed Chapter 11 bankruptcy late Wednesday in the U.S. Bankruptcy Court for the Southern District of New York.

The company said in court documents that its business operations have been severely impacted by the pandemic, including government-mandated store closures, fulfillment issues due to supply claim shortages, production delays and delays in return to work for nearby commercial office spaces.

“While the debtors have a significant customer base, the impact of the Covid-19 pandemic caused the debtors’ revenue to decline year-over-year,” the company said.

“Year through date to July 31, the debtors’ gross sales were approximately $25.46 million, an approximate 50% drop from the same period in 2018.”

ABC said its liquidity position has now reached the point that further deterioration, without near-term funding, would likely require that the debtors cease operating.

Prior to the bankruptcy filing, ABC had reached out to several parties to obtain financing, but was not offered terms for viable financing as a result of its financial condition. As a result, the company pivoted to a going-concern sale of its assets to its pre-petition lender, 888 Capital Partners, LLC, which is acting as the proposed stalking horse bidder for the assets.

As of the petition date, the outstanding balance due on the pre-petition loan was about $8.75 million.

The lender has agreed to fund the debtor’s operations and the administration of the bankruptcy cases through an up to $5.7 million debtor-in-possession facility, with the lender credit bidding the resulting debt as well as the pre-petition secured debt.

Interest on the DIP facility will be 12% per annum, with default interest set at 15% per annum. There is a $120,000 commitment fee.

The DIP facility is set to mature on Nov. 10.

ABC is asking for interim access to $2.25 million of the DIP facility, and is also seeking the court’s approval to use the cash collateral of 888 Capital.

The company listed $10 million to $50 million in estimated assets and $50 million to $100 million in estimated liabilities.

Its largest unsecured creditor is Northern Trust, based in Chicago, with a $15.55 million bank debt claim. No other creditors were listed with unsecured claims of $1 million or more.

The New York-based furniture retailer filed bankruptcy under Chapter 11 case number 21-11591.

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