Ortho Seeks Chapter 11 Protection : Retailing: The firm plans to keep operating while it restructures, a move that is expected to result in the closing of some outlets.
Ortho Mattress Inc., the nation’s largest factory-direct bedding merchant, filed for federal protection from its creditors Wednesday, the third Southern California furniture retailer to falter in the past month.
Ortho, which operates more than 80 showrooms in the Western United States, said it would continue operating as usual while undergoing a restructuring that is expected to result in the closing of nearly half its outlets during the next year.
The company, which has its headquarters and manufacturing operations in Rancho Dominguez, did not reveal its assets and liabilities, but insiders said its debts outweigh its holdings.
Ortho’s filing under Chapter 11 of the U.S. Bankruptcy Code underscores once again the enormous difficulties retailers--particularly those selling high-ticket items such as furniture--are facing as a result of the region’s deepening economic problems.
Barker Bros., the region’s oldest furniture chain, filed for liquidation Nov. 4 and is selling its assets to help satisfy its debts. RB Furniture filed under Chapter 11 on Nov. 15 and has closed its outlets at least for now.
Industry sources said the problems that drove Ortho into bankruptcy are virtually identical to those that plagued Barker Bros. and RB Furniture: a costly leveraged buyout by investors unfamiliar with the furniture industry, followed by operating 4missteps and a souring local economy.
According to industry sources, Pacific Asset Management, the investment firm operated by Gary Winnick, a former lieutenant to junk-bond king Michael Milken, bought Ortho Mattress in 1987 from its three founders. Pacific Asset Management also bought RB Furniture from its founder at about the same time.
Furniture Today, an industry newsletter, lists Ortho’s 1990 sales at $52 million, about even with those of the prior year. Sources said the company’s 1990 sales of $114 per square foot were considerably lower than those of most other top furniture retailers and speculated that the stagnant sales had led to losses.
Steven Gerbsman, a crisis management specialist brought in to manage Ortho three weeks ago, declined to detail the company’s financial performance in recent years.
Gerbsman said the bankruptcy filing would have “minimal impact” on the company’s operations in the immediate future. However, he said executives hope to consolidate company assets and eliminate or renegotiate leases--steps that would likely lead to the closing of some outlets.
He said the company expects to keep the “majority” of its more than 80 locations open following the emergence from bankruptcy. Gerbsman would not say how many workers the company employs or what their long-term fate would be.
Ortho, which makes mattresses and sells beds and other furniture items, was founded in 1963 in North Hollywood by Jerry, Herman and Sherman Michaels and grew to become the largest business of its kind in the nation before being sold in 1987.
