Art Van Furniture, which is held by AVF Parent, is in Chapter 11 bankruptcy, and was proceeding – til the impact of the coronavirus was fully felt – with the process. (We last and first wrote about the company back on March 5, 2020). Now the company and its creditors – in a highly unusual move in these extraordinary times – seem to have agreed to put the bankruptcy process into deep freeze for several weeks. That was the case made by attorneys for AVF Parent to the judge in the case.
The problem is that the states in which the furniture retailer operates are on lockdown, which coincided with the attempted liquidation of much of the furniture. With all prospective customers huddled at home, the “going out of business” banners have been put away and a different approach sought. As the Law360 article we consulted for this report explained: “With this plan in place, .. the debtors hope to preserve [their] options to restart going-out-of-business sales at the bulk of AVF’s] stores and possibly revive a scuttled deal to sell 44 others as a going concern”.
We’re not sure how the judge will rule but that’s one more spanner in the works for creditors – including the two BDCs with exposure in the company’s 2024 Term Loan – getting much in way of a recovery. At year-end 2019, the debt was already on non accrual and discounted by FS-KKR Capital (FSK) and FS Investment II by (67%). At time of writing – March 31 2020 – the debt was trading at a discount of (84%). This suggests the two BDCs should not be expecting to get much more than crumbs in the ultimate resolution and that realized losses – probably recognized in the IIQ 2020 – will be huge: somewhere around ($150mn).