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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.
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