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Levitz Files for Bankruptcy Protection, to Shut 18 Stores

September 06, 1997|From Bloomberg News

Levitz Furniture Corp. on Friday said it filed for bankruptcy court protection after its cash supply dwindled amid years of losses.

The company plans to close 18 stores, resulting in the loss of 300 jobs. No California stores will be shut down.

The closures leave Boca Raton, Fla.-based Levitz with 129 stores in California and the East Coast and Texas. The company also said it lined up a $260-million interim loan from B.T. Commercial to fuel its reorganization and return to profitability.

"Operating under Chapter 11 will enable the company to continue the turnaround and repositioning efforts begun last year," Michael Bozic, chairman and chief executive, said in a statement. The filing also lets Levitz "restructure the heavy debt load which has been consuming our cash flow," he said.

Levitz has been hurt by increased competition and the perception among consumers that its furniture is outdated and sold in a warehouse format that is unappealing.

The company's stock did not trade Friday, after closing at 75 cents on the New York Stock Exchange on Thursday.

Levitz has posted losses in five of the last six years, amounting to $67.6 million. Its only profitable year during the stretch came in 1995, when it earned $2.4 million.

"Shoppers aren't going to Levitz because you don't want the Lazy-Boy with plaid upholstery," said Peter Chapman, president of Bankruptcy Creditor's Service Inc. "They actually probably have what [consumers] want, but shoppers don't think they do."

Bozic said he's spent the last year upgrading Levitz's furniture lines and overseeing remodeling of 19 stores to do away with the warehouse format.

"We are hoping to get approval from the creditor's committee to do that in about another 30 to 40 stores," he said. "We know customers don't like walking through the warehouse to get to the sales floor."

The 18 stores being shuttered are in Houston; Atlanta; Cincinnati; Salt Lake City; Jacksonville and Fort Lauderdale, Fla.; Reno; and Potomac, Va. The chain will concentrate on its superstores on the East and West coasts, and in Florida and Texas, Bozic said.

The stores to be closed "weren't bleeders," he said. "They were just in markets where the cash flow didn't justify continuing."

Levitz's parent company listed $116 million in liabilities and $13 million in assets in the Chapter 11 petition filed in Wilmington, Del. The company also defaulted on about $191 million in two separate bond issues.

In its court papers, officials said the company had $8.43 million in unsecured debt, all of it owed to First National Bank Assn. in St. Paul, Minn.

Suppliers cut off deliveries to Levitz late last month, and the company's bonds plunged amid speculation it would file for bankruptcy protections.

Officials also warned investors in an August filing with the Securities and Exchange Commission that the company may not be able to remain a going concern.

Bozic said that when retailer Montgomery Ward filed for bankruptcy protection in July, suppliers became less willing to keep shipping goods to the struggling Levitz.

Rowe Furniture Corp. said it would resume shipments to Levitz since it has new financing in place. Rowe said it would take a charge of $2.4 million, or 18 cents, in the third quarter to write down the $3.9 million it is owed by Levitz.

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