By Vince Sullivan

Law360 (April 3, 2020, 4:27 PM EDT) -- After shuttering its stores due to business restrictions put in place to combat the spread of the COVID-19 pandemic, home furnishing retailer Art Van Furniture told a Delaware judge Friday that it will be filing a motion to convert its bankruptcy case to a Chapter 7 liquidation Monday.

During a hearing conducted via telephone and video conference, debtor attorney Gregory W. Werkheiser of Benesch Friedlander Coplan & Aronoff LLP said the company's situation hasn't improved since Art Van told the court earlier this week that it no longer had access to its lender's cash and would likely be forced to liquidate.

"Big picture, not much has changed. Given the circumstances ... we're moving forward with a contemplated conversion of the cases," Werkheiser said. "This evening we anticipate filing the motion to be heard at Monday's hearing."

Art Van closed all 169 of its retail locations March 19 after the governors of Michigan, Maryland and Pennsylvania — among others — instituted restrictions on the operation of non-essential businesses in an effort to mitigate the effects of the coronavirus. When filing for bankruptcy, the company envisioned closing down all but 44 of its stores while selling the remaining as a going concern.

Those store-closing sales were halted by the shutdowns, and the going-concern sale was terminated given the uncertain business climate as the disease spreads across the country.

The debtor presented a plan to the court to "mothball" its operations to ride out the crisis in hopes of restarting the going-out-of-business sales and revive the going-concern transaction, but secured lender Wells Fargo declined to continue funding Art Van's plan earlier this week when it became apparent the debtor's obligations already outstripped its available cash.

U.S. Bankruptcy Judge Christopher S. Sontchi urged Art Van to file the conversion motion as soon as possible, saying it shouldn't wait until it after had resolved all issues with all parties. He added that he was grateful for the work of everyone to try and deal with the unforeseen circumstances presented by the COVID-19 outbreak and the ensuing economic repercussions.

"I do appreciate the efforts of the professionals on a very difficult track here," Judge Sontchi said. "I know it's a very, very difficult situation based on facts that none of us ever anticipated would ever occur."

The hearing on the conversion motion will be held at 1 p.m. on Monday.

Art Van filed its Chapter 11 petition on March 8, citing extreme market conditions for its retreat into bankruptcy, while carrying more than $200 million in debt.

Founded in 1959, Art Van operated 169 furniture and mattress stores in Michigan, Indiana, Ohio, Illinois, Pennsylvania, Maryland, Missouri, and Virginia under the names Art Van, Pure Sleep, Scott Shuptrine Interiors, Levin Furniture, Levin Mattress and Wolf Furniture.

Art Van is represented by Gregory W. Werkheiser, Michael J. Barrie, Jennifer Hoover, Kevin Capuzzi and John C. Gentile of Benesch Friedlander Coplan & Aronoff LLP, and Marc J. Phillips and Maura I. Russell of Montgomery McCracken Walker & Rhoads LLP.

Secured lender Wells Fargo is represented by J. Cory Falgowski of Burr & Forman LLP, and Marjorie S. Crider, Christopher L. Carter and Jennifer Feldsher of Morgan Lewis & Bockius LLP.

The Office of the United States trustee is represented by Linda Richenderfer.

The case is In re: Art Van Furniture LLC et al., case number 20-10553, in the U.S. Bankruptcy Court for the District of Delaware.

--Editing by Adam LoBelia.

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