RB Furniture Forced to File for Bankruptcy Protection : * Retailing: Tired of waiting, creditors push the largest locally based chain into Chapter 11.
RB Furniture, Southern California’s largest remaining local furniture chain, said late Friday that its creditors have forced it into filing for involuntary bankruptcy protection.
The Chapter 11 filing represents the second major bankruptcy action for a Southern California furniture chain this month and underscores the difficulties that retailers--particularly those selling high-ticket items--are facing during the region’s apparently deepening recession. Barker Bros., the region’s oldest furniture chain, filed for bankruptcy protection Nov. 4 and is liquidating its business to help satisfy its debts.
Citing sales declines and tight cash, Irvine-based RB closed its remaining 28 outlets in Southern California on Monday and laid off its nearly 500 employees. However, the company promised to reopen after Thanksgiving, recalling most of its employees--to stage a huge “cash-raising” sale.
Company executives said Friday that the inventory liquidation sale will still be held to satisfy its many creditors, but probably not until mid- to late December.
The fate of RB Furniture after the sale is still unknown. David Walsh, a crisis management specialist brought in this week to head the company, said the firm is actively looking for a buyer interested in its name and store locations. However, he said no buyer has emerged.
In the last 18 months, three other furniture chains have closed or sought bankruptcy protection in Southern California: W. J. Sloan, Angelus and Furnishings 2000. Stylus, which had been in Chapter 11 bankruptcy, emerged late last month and is operating under normal business conditions.
Suppliers said RB has been in trouble for months and had been holding extensive talks with suppliers in an effort to prevent a bankruptcy filing. However, this week, suppliers drew the line. Led by four that hold some of the largest overdue bills, the suppliers forced the company into involuntary bankruptcy in order to assure an orderly repayment schedule to creditors.
Walsh declined to specify how much the company owes creditors, but other sourced pegged it at $18 million. Walsh said company debts outweigh assets.
According to industry analysts, furniture industry sales peaked in 1987 and have been steadily dwindling. The four-year downturn is the industry’s longest recession since World War II and three times longer than the average 16-month downturn the last four decades.
Analysts note that RB and Barker Bros. were also victims of the leveraged buyout craze of the 1980s. Both companies, after years of successful operations in the region, were bought by investment bankers with no previous retailing experience through highly leveraged deals that left the companies with enormous debts.
RB was purchased in 1988 for $53 million by a Beverly Hills investment group led by Gary Winnick, a former top lieutenant to junk bond king Michael Milken. When Winnick’s group, Pacific Asset Management, purchased the company, it had 51 stores in California, Washington, Oregon, Arizona and Texas. However, the chain currently has just 28 outlets, all in Southern California. The company had sales of $110 million last year, according to Furniture Today, but analysts said current-year sales would be far lower due to the store closings.
