Wells Fargo, other creditors seek Chapter 7 for United Furniture
Jan. 3—TUPELO — Creditors are seeking to recoup millions from United Furniture Industries, and one of its largest creditors — banking giant Wells Fargo — is pushing the company into an involuntary Chapter 7 bankruptcy filing.
Chapter 7 is a liquidation of a company's assets, which are sold to pay creditors. Wells Fargo, in a filing Friday with the U.S. Bankruptcy Court for the Northern District of Mississippi, said the manufacturer owes it at least $97.8 million.
The petition also names two other creditors — Security Associates of Mississippi/Alabama and V&B international — as being owed money. In total, United owes more than $99.5 million, excluding interest, fees and expenses, to the three creditors alone.
Security Associates says United owes it at least $265,000, while V&B claims it is owed over $30,000.
Other creditors who have sued United are also looking for payment from the company, which shut down its operations on Nov. 22. The move left some 2,700 workers in three states, including approximately 1,100 in Northeast Mississippi, without work or benefits.
Well Fargo said it has been contacted by other creditors but is ultimately not obligated to help.
"As a result of United Furniture Industries' abrupt closure, numerous issues ancillary to liquidation of the collateral have arisen that are overwhelming Wells Fargo's ability to preserve and monetize its collateral," the bank said. "For example, numerous creditors have contacted Wells Fargo regarding claims against UFI, including claims for property allegedly held by UFI on their behalf.
"While Wells Fargo has worked with creditors as they have come forward to resolve claims, Wells Fargo has no duties to such creditors and has been required to proceed on an ad hoc basis without having the benefit of the institutional knowledge of the 2,700 former employees of UFI to address these claims."
In an emergency motion filed Saturday, Wells Fargo requested the appointment of an interim trustee to oversee the liquidation as soon as possible.
"Immediate steps must be taken to install a trustee to immediately take control of, and with Wells Fargo's assistance, liquidate the alleged debtor's assets in order to preserve and maximize the value of UFI's assets for the benefit of all creditors," the bank said.
United has yet to file for bankruptcy protection.
According to reports, United's board of directors held an emergency meeting on Nov. 20 and decided to file for Chapter 11, which would have allowed a reorganization of the company. However, company owner David Belford axed the plan the next day, according to Phillip Hearn, an attorney representing hundreds of employees in a class action lawsuit.
Belford maintains his insight into the company's finances were "limited" and said he had trusted executives to operate the company without "micromanagement."
At its peak, United was one of the largest furniture companies in the country, employing nearly 3,500 with Mississippi plants in Amory, Belden, Hatley, Nettleton, Okolona, Vardaman, Verona and Wren. The company also had six plants in North Carolina and one in California.
