At a hearing Thursday in New York bankruptcy court, U.S. Bankruptcy Judge Shelley Chapman approved the retailer’s chapter 11 plan that would set the company up for a quick exit from bankruptcy.
As part of the plan, the retailer said it has received $3 million from its parent company, which would fully cover its administrative and priority expenses in bankruptcy court, as well as provide partial recoveries for unsecured creditors at a rate of roughly 27 cents on the dollar.
The plan received no objections, and received the support of all eligible creditors in the case, said Furla USA’s attorney Joseph Moldovan, who chairs the business solutions, restructuring and governance practice at Morrison Cohen LLP. The bankruptcy has moved fairly quickly as it took place under the so-called Subchapter V process of Chapter 11, a recent bankruptcy format designed to expedite the process for small companies.
Moldovan has characterized the distributions to unsecured creditors as reasonable under the circumstances of a retailer undergoing a restructuring during the ongoing COVID-19 pandemic.
“When we filed, we stated that our goal was to utilize the Subchapter V process, so that we could quickly restructure and emerge from bankruptcy well-positioned to take advantage of a return to normal upon the full reopening of the markets post-pandemic,” Moldovan told the court Thursday.
“We anticipated a very short stay in Chapter 11, and to promptly move to confirm a plan utilizing the bankruptcy process to enable us to shed burdensome leases and debt, and exit the bankruptcy as a niche boutique style luxury goods company with a healthy balance sheet, enabling us to focus on better margins instead of volumes of sales,” he said.
At the remote hearing, Chapman gave her approval to the plan and observed the case had gone so smoothly that “this case from the outset and through today has been a model of how this ought to go, and certainly, the participation of the parent helped a great deal.”
Furla USA, which entered the bankruptcy process in November with 14 locations, has shut down half of those locations over the course of the proceedings, and will emerge with seven locations including its flagship on Fifth Avenue in Manhattan. The bankruptcy plan is expected to go into effect on Feb. 12, and the company plans to pay creditors soon after the plan’s effective date, the company said.
“The present decision was made as a part of the brand’s reorganization strategy to streamline operations in the U.S.,” the retailer said in a statement Thursday. “Restructuring the company’s business will allow Furla the financial flexibility to concentrate on the core values of the brand and invest in areas of growth like e-commerce and wholesale to achieve meaningful, long-term success.”