American Freight to Close All Locations as Franchise Group Restructures

Furniture World News Desk on 11/4/2024

Franchise Group, Inc. (FRG) has announced a restructuring support agreement (RSA) with its first lien lenders, covering around 80% of its first lien debt. The agreement aims to streamline FRG’s debt load, increase liquidity, and support core brands Pet Supplies Plus, The Vitamin Shoppe, and Buddy’s Home Furnishings for sustainable growth.

As part of this strategy, FRG has determined to wind down American Freight Appliances and Furniture, which operates over 370 stores in 40 states. It  has struggled due to sustained inflation and macroeconomic challenges facing the large durable goods sector. It will commence store-closing sales at locations nationwide and online on November 5. FRG anticipates that Buddy's Home Furnishings (www.buddyrents.com) with over 300 rental-purchase and LTO stores, will continue operations following restructuring.

The RSA proposes converting first lien debt into 100% equity in the reorganized company, significantly reducing FRG's debt and enhancing its liquidity. In conjunction with the RSA, FRG and its affiliates have voluntarily filed for Chapter 11 in the U.S. Bankruptcy Court for the District of Delaware. This filing does not impact franchised locations of FRG's brands.

To support ongoing operations during restructuring, FRG’s lender group has committed $250 million in debtor-in-possession (DIP) financing, which is subject to Court approval. This financing, combined with FRG’s cash reserves, will ensure continued operations across its brands and fulfillment of commitments to employees, customers, vendors, and franchise partners.

"Today's announcement to de-lever our balance sheet is a pivotal step forward in enabling our market-leading businesses Pet Supplies Plus, The Vitamin Shoppe, and Buddy’s Home Furnishings to realize their full potential," said Andrew Laurence, FRG’s President and CEO. "Each of these businesses has a demonstrated value proposition and provides great products and services to customers, which they will continue to do seamlessly during this process. Strengthening FRG's balance sheet will allow us to enhance our support for these businesses as they advance their growth trajectories."

FRG has filed motions with the Court to maintain regular business operations across its core brands during restructuring, including requests to continue wage payments and employee benefits, along with customer programs. Vendor payments for goods and services authorized after the filing will proceed as usual.

The restructuring plan includes a Court-approved marketing process to maximize FRG's value, with the intent of positioning its operating businesses for long-term stability. Details of the Chapter 11 process, including the Plan and Disclosure Statement, will be submitted to the Court shortly.

For more information on the Chapter 11 proceedings, visit cases.ra.kroll.com/FRG.