Lyndhurst, N.J. — Harvey Electronics, a regional specialty retailer that caters to the New York tri-state area, filed a voluntary petition for Chapter 11 protection with the U.S. Bankruptcy Court for the Southern District of New York today.
According to a release, the company will continue to operate its business and manage its property as a debtor-in-possession, and expects to “promptly file a plan of reorganization.” It warned the final plan “may adversely affect Harvey’s outstanding common stock through the issuance of substantial additional shares or common stock or otherwise.”
The company said it hopes to emerge from court protection by the spring of 2008.
Harvey cited a number of recent events having necessitated the Chapter 11 filing including “the distraction and expense related to unsuccessful merger negotiations with Myer-Emco, Inc. [which] cost Harvey over $1.2 million.” It also mentioned its “inability to raise new equity capital in the months immediately following the failed acquisition,” which Harvey said triggered the November delisting of its common stock from the Nasdaq stock market, creating “an event of default under the existing senior secured credit agreement.”
At the time of today’s filing, Harvey’s Interim CEO, Michael E. Recca, was also named chief restructuring officer of the debtor.
In the company’s release, Recca said, “We regret that Harvey’s best path to reorganization is through the courts, but despite the other distractions over the past year, our custom installation business remains strong, This step allows us to accelerate the transformation of our business from a specialty retailer with a home installation business to a home installation expert with appropriate retail distribution. While we will be closing and right-sizing some locations, we expect the majority of our stores will continue to play a critical role in our future operations.”
YA Global Investments, Harvey’s current secured lender, is said to have agreed to provide the retailer with a $1.5 million debtor-in-possession line of credit, subject to bankruptcy court approval of the terms of the financing.
Acting as the retailer’s bankruptcy counsel will be Ruskin Moscou Falitscheck; P.C. BDO Consulting, a division of BDO Seidman, will act as financial advisor; and the Trenwith Group will provide banking services to the debtor.
