Archbrook Files Chapter 11

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

The company,

which last week

said it was 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 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 10 creditors and the amount of their claims 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 include Amazon.com, Best Buy, Costco, Newegg.com, QVC and Walmart. Broken out by distribution channel, national retailers and Expert Warehouse -- the buying and fulfillment arm of the BrandSource buying group in which Archbrook held a 60 percent stake -- each represented 18 percent of total sales, followed by online-only e-tailers (16 percent), 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 for about half of all white-goods sales, court filings show.

BrandSource acquired Expert's inventory for about $4.8 million, and assumed its debt obligations, on July 5, and has since moved its business to global distributor Ingram Micro. Home Entertainment Source, 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 support 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 has been exploring strategic alternatives including refinancing and a possible sale of the company since May 26.

A hearing will be held July 19 in the U.S. Bankruptcy Court of the Southern District of New York in Manhattan to approve the auction, which is tentatively scheduled for Aug. 8.

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