Home Depot’s bankrupt rival reaches sale agreement to stay open

Home improvement retail chains benefited from increased business during the Covid-19 pandemic, but many faced a financial crisis when the pandemic subsided.

Consumers who stayed at home during stay-at-home orders were busy with home improvement projects and renovations. This was good news for home improvement retailers and provided economic relief for retail establishments that were struggling before the pandemic.

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Once businesses began to open after the pandemic and people began to return to physical facilities and their jobs, people had less free time for those home improvement projects.

A decline in demand for home improvement products, along with inflation and high interest rates, have created financial difficulties for some home improvement retailers, forcing them to file for bankruptcy to reorganize their businesses or to liquidate and close stores.

Home improvement chain liquidations and closings are not a common occurrence, but there have been some in recent years.

Historic paint retailer Kelly-Moore Paints has closed all 157 of its retail locations and laid off approximately 700 employees in January 2024 in an out-of-court shutdown of all of its business operations. The company was unable to meet the financial burden of future asbestos claims after paying approximately $600 million in damages.

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Another major home improvement retailer, LL Flooring, filed for Chapter 11 bankruptcy protection on Aug. 11 in the U.S. Bankruptcy Court for the District of Delaware in Wilmington, seeking to sell its assets after suffering from windfall against housing, repairs and the reshaping of markets that took place when the Covid-19 pandemic subsided.

The company had hoped to sell all of its assets in a Section 363 bankruptcy sale, but opted to close and liquidate more than 400 store locations in 47 states after two bids fell through when the debtor rejected the bids from F9 Investments and Issac Capital Group as inappropriate.

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Negotiations continued and within days, the debtor sealed an agreement with one of the bidders.

Bankrupt retail chain LL Flooring has reversed course from liquidating and closing all its stores and has agreed to sell its assets and distribution center to an affiliate of private equity firm F9 Investments for a purchase price which includes a fixed amount of $1 million, an inventory price of 57% of the landed cost value of the purchased inventory and assumed cure costs.

F9’s subsidiary F9 Brands on September 5 reached an agreement with the debtors, the official committee of unsecured creditors and the debtor-in-possession asset-based loan lenders on an asset purchase agreement and filed the agreement in the District of Delaware in September . 6.

The debtor agreed to the buyer’s terms after F9 increased its offer for the stock; establish an acceptable value for furniture, fixtures and equipment; and assumed certain debts, cure costs, store rent and employee obligations.

Under the terms of the acquisition, the buyer supports the employment of up to 1,000 workers, has offered to acquire up to 219 stores and the distribution center of LL Flooring Sandston, Va., and will continue to operate as a going concern, according to the F9 of 10 statement September.

LL Flooring will further close approximately 211 stores, which have already begun liquidation.

The parties have scheduled a sale hearing for Sept. 16 with Judge Brendan L. Shannon to consider approving the deal, which could close by the end of September.

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