hhgregg seeks approval of Electrolux consigned inventory rights deal

By Caroline Salls

Pittsburgh, Nov. 26 – hhgregg, Inc. and the official committee of unsecured creditors appointed for its Chapter 11 case requested court approval of a lawsuit settlement reached with Electrolux Home Products, Inc. and hhgregg’s lenders, according to a motion filed Monday with the U.S. Bankruptcy Court for the Central District of California.

“Approval of the settlement with Electrolux and the debtors’ lenders would resolve one of the most significant litigation matters still pending in these cases, maximize value for the debtors’ estates with an immediate cash infusion and establish a cornerstone on which the movants can further liquidate assets and wind down these Chapter 11 cases pursuant to a liquidating Chapter 11 plan or otherwise,” the motion said.

hhgregg said the Electrolux litigation deals with competing rights to consigned inventory and the proceeds it generated in store liquidation sales.

With damages alleged by Electrolux in the neighborhood of $18 million to $19 million, hhgregg said the litigation tied up substantial cash through several reserves “and thus represented a crippling overhang to finally paying off the [debtor-in-possession] lenders and advancing the progression of these cases.”

If the settlement is approved, the company said the hhgregg debtors will gain access to over $3.7 million in formerly reserved cash to help pay down remaining secured DIP loan debt, mutual releases and the dismissal with prejudice of the Electrolux adversary proceedings.

Electrolux is slated to receive $3.5 million of the reserved cash, a $4 million administrative priority claim and the dismissal with prejudice of the committee’s adversary proceeding and hhgregg’s counterclaims against Electrolux.

hhgregg is an Indianapolis-based specialty retailer of consumer electronics and home appliances. The company filed for bankruptcy on March 6, 2017 in the U.S. Bankruptcy Court for the Southern District of Indiana under Chapter 11 case number 17-01302.

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