Furniture Brands, one of America’s largest home furniture makers, has tapped restructuring lawyers and advisers to deal with its debt load

August 19, 2013, 4:18 p.m. ET

Struggling Furniture Brands Taps Restructuring Advisers

EMILY GLAZER And PATRICK FITZGERALD

Furniture Brands International Inc., FBN -10.13% one of the nation’s largest home furniture makers, has tapped restructuring lawyers and advisers to deal with its debt load, people familiar with the matter said. The advisers are examining several alternatives, one of which could be a Chapter 11 bankruptcy restructuring, though the situation is still fluid, these people said. Representatives for Furniture Brands, which sells under the Broyhill, Lane, Drexel Heritage and Thomasville names, didn’t respond to requests for comment. St. Louis-based Furniture Brands had sales of about $1 billion in 2012, roughly half of what the company brought in a decade ago. The company cumulatively lost more than $91 million in its last two fiscal years, and analysts are forecasting another loss in 2013. It hasn’t made a profit since 2006.The company, whose shares have tumbled by more than 90% in the past year, is working with law firm Paul, Hastings, Janofsky and Walker LLP, investment bank Miller Buckfire & Co. and turnaround firm Alvarez & Marsal to address its debts and low cash flow amid a struggling U.S. furniture market. Like other domestic furniture manufacturers, the company has been hurting from the lingering effects of the recession and foreign competition.

In a regulatory filing earlier this month, the company said it is pursuing a number of cost-cutting strategies, including “facility consolidation, reductions in force and reductions in controllable costs.”

The company also said in the filing it’s “exploring options with our lenders to modify our credit facilities to improve our liquidity,” which now stands at about $45 million.

Asset sales that could help stave off Chapter 11 are complicated by the company’s more than $200 million in unpaid pension obligations. At the end of 2012, Furniture Brands employed 5,600 people in the U.S. and another 3,500 overseas.

Some creditors are being advised by law firm Kirkland & Ellis LLP and restructuring advisers FTI Consulting Inc., FCN +0.12% some of these people said.

Furniture Brands’ debt includes a $50 million term loan from Pathlight Capital, an affiliate of private-equity firm Sycamore Partners. Pathlight assigned the loan to investment firm Oaktree Capital Management earlier this year. Wells FargoWFC -0.61% & Co., Bank of America Corp. BAC -1.87% and General Electric Co.GE -0.42% unit GE Capital agreed to provide Furniture Brands with up to $200 million in financing under an asset-based revolving loan several months ago, one of these people said.

The roots of Furniture Brands date back more than 100 years and are connected to the creation of International Shoe Co., which eventually became the conglomerate Interco Inc. in the 1960s. Interco’s holdings in the 1980s included shoe makers Converse Inc. and Florsheim Shoes in addition to furniture makers such as Broyhill, Lane and Ethan Allen. After spinning off its shoe business in the 1990s, the company changed its named to Furniture Brands International.

Despite recent signs of a housing market rebound, some analysts say it may be too late to save Furniture Brands from a trip to bankruptcy court.

“This is a company that has a legacy of fabulous brand names and a rich history, but there is great deal of difficulty of resurrecting those brands given the changes in the industry and the ground company has lost in the last five years,” said Budd Bugatch, a managing director at Raymond James Financial Inc. RJF -1.17%

In May the company initiated a reverse 1-to-7 stock split in order to keep from being delisted, but that move hasn’t stopped the stock’s slide. Furniture Brands stock was off 10% in New York on Monday at 71 cents a share.