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Wells Fargo Drags United Furniture to Bankruptcy Court

A little more than a month since it abruptly closed its operation, United Furniture Industries (UFI) was slapped with an involuntary Chapter 7 bankruptcy petition by Wells Fargo and two other creditors.

The Mississippi-based parent company of Lane Furniture shut its doors without warning on Nov. 21, laying off around 2,700 workers across its operation. In the motion, filed on Dec. 30 in the United States Bankruptcy Court for the Northern District of Mississippi, Wells Fargo said UFI owes the bank $99.2 million in secured debt.

Security Associates of Mississippi/Alabama and V&B International Inc. were also named as plaintiffs in the motion, with the former declaring it has no less than $265,000 in unpaid services and the latter saying it’s owed at least $30,486.50 in purchase orders. But a Dec. 31 filing stated that the petitioners hold unsecured claims against UFI of $97.8 million at minimum.

“The magnitude of claims and issues are accelerating,” Wells Fargo said in the Dec. 31 filing. “All creditors would thus be best served by an orderly liquidation of the alleged debtors by a Chapter 7 trustee in a Chapter 7 bankruptcy case.”

The Dec. 31 declaration outlined the credit agreement between Wells Fargo and UFI, which was signed on Jan. 28, 2021 and then amended in March 2021, January 2022, June 2022 and July 2022. Per the agreement, Wells Fargo would provide a revolving credit facility of up to $130 million to UFI and related companies.

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A motion filed on behalf of Wells Fargo on Jan. 3 calls for an expedited hearing on the emergency motion for appointment of an interim trustee and certain related relief, which is scheduled for Jan. 6. Wells Fargo said the trustee appointment was necessary to liquidate UFI’s assets to pay off the furniture maker’s creditors.

This motion is just the latest in mounting litigation against the defunct furniture manufacturer. On Dec. 2, United Furniture was served with a civil suit by DFW LinQ Transport Inc., which alleged that more than 44,000 pounds of copper wire were supposed to be delivered to Southwire in Starkville, Miss., by UFI Transportation. The shipment brokered by DFW LinQ never reached its destination after UFI shut down on Nov. 21. 

In November immediately after UFI closed its doors, several class action and individual lawsuits were filed on behalf of employees terminated by the company. Those suits alleged the company violated the Worker Adjustment and Retraining Notification (WARN) Act by not giving workers 60 days notice of termination and requested the standard 60 days’ pay as outlined by the WARN Act.

According to the New York Post, David Belford, owner of Stage Capital, LLC, which counts UFI among its subsidiaries, sent the shutdown message to employees after an emergency board meeting on Nov. 20 that resulted in the decision to file Chapter 11 bankruptcy protection. But Belford refused to follow that guidance and instead opted to shut down the company.

Prior to that announcement, the company asked Wells Fargo for additional funding, which it did not receive.