LL Flooring Approved For $41M Ch. 11 Asset Sale

The parent company of the flooring seller formerly called Lumber Liquidators received a Delaware bankruptcy judge’s approval Monday to sell its assets for $41 million to a private equity firm that is ready to close on the acquisition by the end of the month.

During a hearing in Wilmington, U.S. Bankruptcy Judge Brendan L. Shannon said the ability of buyer F9 Investments LLC to complete the acquisition of many of the debtor’s retail locations by Sept. 30 made it a better offer than a competing bid that offered an additional $1.2 million.

Debtor LL Flooring Holdings Inc. said the rival offer from Stealth Holdings was not the best because that bidder’s ability to close on the deal in short order was not certain, and since its Chapter 11 cases are at risk of administrative insolvency.

“The debtor, again, has been deeply candid with the court with respect to its concerns of administrative insolvency. This case is balanced on a razor,” Judge Shannon said. “The consequences of failing to close would be catastrophic. The work that needs to be done to close this deal in 14 days from today is very, very significant.”

Lisa Laukitis of Skadden Arps Slate Meagher & Flom LLP, who is representing LL Flooring, said the Stealth Holdings bid had emerged last week after a truncated sale and marketing process. She added that the debtor has serious concerns about Stealth’s ability to close quickly. 

“There’s not a scenario where we can sign a contract with Stealth today,” Laukitis told the court during argument. “Pivoting to Stealth would for sure cause some additional delay and cost to the estate.”

She said LL Flooring estimated it would cost about $6.5 million to run a sale process that ran through the end of September to allow Stealth to complete due diligence and continue the bidding activity between Stealth and F9, and that F9 would not continue bidding without some form of bid protection that would require additional motion practice.

While Judge Shannon noted he has experienced similar circumstances with a last-minute bidder emerging in a Chapter 11 sale process, and in previous cases has delayed consideration of a sale motion to allow for further bidding, this case’s specific challenges weighed in favor of granting the debtor’s motion to sell to F9 on Monday.

The transaction had the support of the debtor’s secured lenders and the official committee of unsecured creditors.

Monday’s hearing was the latest in a Chapter 11 case LL Flooring filed last month. The company estimated it had assets worth between $500 million and $1 billion and liabilities between $100 million and $500 million. The company plans to shutter 94 of its 300 stores. 

The debtor is represented by Joseph Larkin, Joseph Liberi, Lisa Laukitis, Elizabeth Downing, Angeline Hwang and Shana Elberg of Skadden Arps Slate Meagher & Flom LLP.

The case is In re: LL Flooring Holdings Inc., case number 1:14-bk-11680, in the U.S. Bankruptcy Court for the District of Delaware.

—Editing by Michael Watanabe and Covey Son.