Norwalk Furniture suspends work, blames bank

NORWALK It was deja vu Wednesday at the Norwalk Furniture plant. At 6 a.m. Wednesday
Cory Frolik
May 24, 2010

 

NORWALK

It was deja vu Wednesday at the Norwalk Furniture plant.

At 6 a.m. Wednesday -- less than two months after the furniture company first closed the doors at its plants across the U.S. -- employees were told to go home and await further instructions.

Production at the company was brought to a grinding halt after the money needed to cover payroll ran out a second time, company officials said.

"They shut down all operations throughout the company," said Joe Mosbrook, company spokesman.

The news came as a shock to employees, who thought things were back on track.

"When the letter of intent was signed, people thought this was going to be worked out and secured, but now it seems like things are deteriorating," said one longtime Norwalk Furniture employee, who asked for anonymity while discussing sensitive business matters.

What caused the closure the first time was Comerica, Norwalk Furniture's bank, pulling the company's line of credit.

After the bank agreed to negotiate the sale of the company's assets and interested investors stepped forward, the company resumed production to finish outstanding orders and take new ones.

The first closure lasted a week. Talk since then indicated the company wanted to ramp up to full capacity.

But as employees arrived at work Wednesday, they were told once more that business is on hold.

"We were told that late yesterday afternoon, the bank stopped funding the payroll again. From the way I understand it, there is some breakdown in negotiations with the letter of intent from the two groups interested in purchasing the assets of the company," the furniture employee said.

"Until something becomes more concrete, the bank is stopping funding them again."

In a blog posted Wednesday, Norwalk Furniture announced that unresolved financial issues led to the interruption of business operations.

"Comerica Bank, our lender, was temporarily unable to fund our operations today based on the present state of the negotiations for the financing plan for the period through closing of the deal between Norwalk and the buyer, IRG/Blackbird Capital Partners. Negotiations continue, and we are hopeful for a quick resolution to these negotiations," the posting reads.

As before, a lack of funds was responsible for the shutdown, due to a decline in sales and a need for financial investment, Mosbrook said.

"They are trying to get a cash infusion, and they are looking to close the sale," Mosbrook said.

Closing the deal with the two interested private equity firms would likely take care of money concerns, he said. IRG Capital Group and Blackbird Capital Partners renewed their pledge to purchase the company two weeks ago by signing a revised letter of intent.

The company plans to restart operations this week, but company officials say that is not a certainty.