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Archbrook Laguna Selling Off Its Assets

7/17/2011 08:01:00 PM Eastern

CARLSTADT, N.J. — CE, IT and housewares distributor
Archbrook Laguna has filed for Chapter 11 bankruptcy
protection and plans to auction off its inventory
next month.

The $800 million company, which had been searching
for new financing or a buyer, was forced into bankruptcy
after lenders GE Capital, Bank of America and
PNC Bank cut its credit following a loan default, and
key vendors including Samsung stopped shipping it.

The distributor, which was operated by chairman Darren
Marino and executive VP Joel Blank, had assets of
$246 million and liabilities of $176.4 million as of March
31, including $36.9 million owed to the banks.

Top creditors and their claim amounts include: Dell,
$9.8 million; Garmin, $5.7 million; Toshiba America
Information Systems, $5.3 million; Samsung Electronics
America, $4.9 million; Hewlett-Packard, $4.9 million;
TomTom, $3.7 million; Acer, $3 million; Toshiba
Consumer Products, $2 million; LG Electronics, $1.8
million; Lenovo, $993,000; and Sharp Electronics,
$985,000.

According to bankruptcy court documents, Archbrook’s
retail accounts included Amazon.com, Best
Buy, Costco, Newegg.com, QVC, ShopNBC and
Walmart. Broken out by distribution channel, national
chains represented 18 percent of total sales,
as did Expert Warehouse, the buying and fulfillment
arm of the BrandSource buying group in which
Archbrook held a 60 percent stake, followed by online-
only e-tailers (16 percent of sales), rent-to-own
(14 percent), other (14 percent), and independent
dealers (12 percent).

Gross revenues were $808 million last year, of
which $49 million was derived from its investment in
Expert Warehouse.

The privately held business was formed in 2000 from
the merger of New Jersey-based Laguna Corp., Georgia-
based BDI Distributors and ArchBrook, a Delaware
corporation. It has 267 employees and maintains distribution
centers here and in Atlanta and Reno, Nev.

Archbrook partnered with BrandSource in 2005
to form Expert Warehouse, which initially carried CE
and added major appliances in 2010. Samsung was
its largest electronics vendor, historically accounting
for about 40 percent of CE sales, while Whirlpool represented about half of all whitegoods
sales, court filings show.

Concerned about Expert Warehouse’s
continued viability due to Archbrook’s
inability to place orders with
Samsung and other vendors, Brand-
Source acquired Expert’s inventory for
about $4.8 million on July 5, and has
since moved its business to global distributor
Ingram Micro (see story above).
Home Entertainment Source (HES), the
buying group’s specialty A/V division, is
also listed as a creditor with a claim of
$171,000.

Archbrook attributed its liquidly
squeeze to aging inventory and a shortfall
in promised vendor marketing funds
that triggered covenant violations with
its lenders. The problems were compounded
by accounting issues associated
with a difficult transition to a new
software platform.

In the wake of Archbrook’s loan defaults,
Samsung, which sold more than
$100 million worth of goods through the
distributor last year, demanded a $7.5
million letter of credit to continue doing
business with the company, which the
banks would not approve.

Archbrook said it had been exploring
strategic alternatives including refinancing
and a possible sale of the business
since May 26.

The company has asked the U.S.
Bankruptcy Court of the Southern District
of New York in Manhattan to hold a
hearing on July 19 to approve the auction,
which is tentatively scheduled for
Aug. 8.