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Law360 (March 26, 2020, 5:32 PM EDT) -- Bankrupt home furnishing retailer Art Van Furniture LLC told a Delaware judge Thursday that it is in negotiations with its lenders and creditors to largely pause its Chapter 11 proceedings to minimize its expenses as it waits out business restrictions designed to stem the spread of the coronavirus.
During a status hearing conducted over the phone, debtor attorney Gregory W. Werkheiser of Benesch Friedlander Coplan & Aronoff LLP said the company has reached an agreement in principle with parties to the case to defer as many obligations as possible for the next few weeks and to limit the ability of other parties to engage in motion practice.
"At a high level what we're contemplating is, to the fullest extent possible, putting the debtor in stasis, or life support mode, for the next six weeks," Werkheiser said.
The practical result of the plan would be to reduce professional fee expenses to a bare minimum and make the "best and most efficient use" of the cash it has on hand since it shuttered all of its 169 stores last week in response to statewide closures of nonessential businesses. The restrictions were imposed in Michigan, Pennsylvania and Ohio, which contain most of Art Van's store locations, to help contain the spread of COVID-19 and have reduced the debtor's revenue to nearly zero, Werkheiser said.
With this plan in place, he said the debtors hope to preserve its options to restart going-out-of-business sales at the bulk of its stores and possibly revive a scuttled deal to sell 44 others as a going concern.
In response, some Chapter 11 debtors have proposed drastic measures of their own to protect the value of their estates while waiting for normal business conditions to return. In Delaware, the parent company of Logan's Roadhouse, CraftWorks Parent LLC, asked the judge overseeing its case to approve temporary procedures that would require parties to the proceeding to confer with the debtor before filing any motions on the docket.
In New Jersey, retailer Modell's Sporting Goods Inc. received approval for a 45-day pause in its Chapter 11 case, saying the move was an extraordinary remedy but that "there is no more extraordinary time than this one."
U.S. Bankruptcy Judge Brendan L. Shannon, who presides over the CraftWorks case in Delaware, said he likely will not be open to such dramatic relief in that case.
Werkheiser said Thursday that Art Van would be seeking some kind of hybrid relief in its own case, with a proposal coming by the end of the week.
U.S. Bankruptcy Judge Christopher S. Sontchi told the debtor and its lender that a standing order in Delaware issued in response to the COVID-19 outbreak pushed all hearings that are not time sensitive to at least April, and that the continued increase in diagnosed cases of the disease in Delaware would likely extend that period.
After discussing the CraftWorks proposal among his colleagues on the bench, Judge Sontchi said he is inclined to agree with the comments of Judge Shannon that the proposal to require movants to confer with a debtor and receive court permission before filing a motion wasn't going to happen.
"I completely understand the pressure and the desire to reduce the administrative burn, which is really not a desire but a necessity," Judge Sontchi said. "I can't enjoin people from seeking relief from the court. I frankly think I lack that power and even if I had it I'm not about to exercise it."
He called the process floated in the CraftWorks case a "non-starter."
Art Van is next scheduled to appear before Judge Sontchi on Tuesday, when Werkheiser said it will seek approval of the procedures it anticipates proposing by Friday. CraftWorks is also scheduled for a hearing on its proposal before Judge Shannon that day.
Art Van filed its Chapter 11 petition March 8, citing extreme market conditions for its retreat into bankruptcy while carrying more than $200 million in debt.
Founded in 1959, Art Van operates 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.
It initially planned to liquidate all but 44 of those stores, but the COVID-19 pandemic forced it to shut down all of its operations, including those going-out-of-business sales. A deal to sell the remaining 44 stores operating under the Levin and Wolf brands was terminated last week for the same reason.
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.
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 Haylee Pearl.
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