Creditors of United Furniture Industries have claimed in court filings that they were blindsided by the company’s move to suddenly lay off 2,700 workers at midnight before Thanksgiving — the first such unexpected bloodbath. revealed the strange sequence of events that led to his arrival.
The Nov. 21 layoffs — in which workers learned they were losing their jobs amid a barrage of late-night emails and text messages — came hours after the Mississippi-based company demanded “immediately significant capital” from its lender Wells Fargo. it has been. Creditors filed for bankruptcy late last week, indicating they could not continue operations without cash.
Wells Fargo — along with two other creditors — is asking a U.S. bankruptcy judge to force United Furniture into Chapter 7 liquidation — “on such short notice” and “without additional information” that the bank would require, such as a budget restructuring. refused according to the request. and approval by its internal credit committee, according to court documents.
Wells Fargo claims in a court petition that it currently owes more than $99 million. He did not specify the amount requested, but said the $130 million loan secured by the company’s assets last summer was “in excess” of what was authorized.
That evening, UFI management told Wells Fargo it would “immediately cease operations and terminate all of its employees immediately,” according to a Dec. 31 court filing. In the process, the company “totally abandoned” all of its properties after Nov. 30, leaving 15 properties unguarded and uninsured, according to the filing.
According to court documents, some homeowners locked their properties and denied anyone entry.
When contacted by Wells Fargo UFI, it said all employees at the company had resigned, except for the CEO and CFO. A day later, they also resigned, according to the application.
Seeking to contain the chaos, Wells Fargo said it has hired a crisis management firm called Focus Management Group to protect UFI’s assets and begin an orderly liquidation. Still, the process became “very cumbersome” as other creditors piled in to file suit, according to court documents.
“Wells Fargo has no obligation to such creditors and has been asked to proceed on an ad hoc basis without using the institutional knowledge of 2,700 former UFI employees to handle these claims,” the bank said in the filing.
Creditors said UFI has “no employees, management or officers,” according to a court filing over the weekend. All that remains is the board led by David Belford, owner and chairman of UFI, which owns 90 percent of the company, the filing said.
Belford, a wealthy Ohio businessman who has been silent for three weeks after being fired, finally called himself a “passive investor” in an interview with a Columbus newspaper, adding that he had “limited understanding of the company’s finances.”
“Recently, I found out how difficult the situation is, how limited the company’s capabilities are” he told Columbus Business First December 12. “Unfortunately, the reality of UFI’s circumstances was brought to the council’s attention too late.”
UFI’s former president and board member Larry George — who is also listed as a board member in the Dec. 31 filing — disputes the filing’s claim that he is a 5% shareholder, and Belford’s self-identification as a “passive investor.” opposed the reef. “
Belford “was always aware of what was going on,” said George, who said he founded the company and was its president until 2020 and a director until June 2022.
“We had quarterly board meetings and we met once a month to discuss finances,” George said. “David attended monthly board meetings in person or via conference call.”
Doug Henby, also listed as a board member, disputed the filing’s claim that he is still on the board and owns a 5% stake in the company, saying he also left last summer.
Wells Fargo said it got its data from loan documents.
According to debt expert Adam Stein-Sapir, less than 5% of companies that file for bankruptcy do so unwillingly or at the request of their creditors.
“If the case goes forward involuntarily, it will make the company look guilty and put it in an even worse light,” Stein-Sapir said.
Bankruptcy attorney Kenneth Rosen added, “The idea of a debtor giving up a lien is amazing.” “The irony is that a debtor in such dire straits would not have been able to reach an agreement with its senior lender long before the foreclosure.”
UFI and Belford did not return calls for comment.