Shortly after closing its new distribution center in Meridian, Miss., Handy Hardware Wholesale filed for Chapter 11 in hopes of reorganizing and re-emerging by early summer 2013.
Wells Fargo Credit is providing $30 million in Debtor-in-Possession financing for the co-op.
In a prepared statement, Handy President Tommy Schifanella said: “Chapter 11 reorganization was not Handy’s preferred option but it was the only option whereby Handy could provide financial stability over the short term for vendors and suppliers to ensure the continued flow of product to Handy’s Member Dealers -- without the risk or uncertainty of non-payment.”
Handy members own 1,300 store locations in 14 states.
The company’s Spring Market, slated for Jan. 31-Feb. 2, will proceed as planned, with town hall meetings arranged to discuss details of the reorganization.
Handy said it has been unable to reach a negotiated settlement agreement with its real estate lender, Capital One National Association. “Handy will continue to work towards a settlement but intends to use the reorganization process to bring a structured conclusion to this relationship,” according to a statement released late Friday.
The statement announcing the Chapter 11 filing also elaborated on the Dec. 31 closing of the co-op’s Meridian distribution center, which was built in 2010 and contains 460,000 sq. ft. of distribution space. This Meridian facility was developed to help the co-op expand operations into the East and Southeast markets. However, Handy incurred more than $30 million of debt in connection with the building and operation of Meridian. Due to operational snags and the economic environment at the time of opening, Meridian was unable to grow fast enough to cover its costs, the company said.