Smitty’s files for Chapter 11
Smitty’s Building Supply, the five unit pro dealer based in Alexandria, Va., filed for protection under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of Virginia, located in Alexandria, Va.
At the time of the Jan. 5 filing, company CEO Rick Smith stated that the unprecedented decline in the housing industry caused his company to take this action. Smith emphasized that “our business will continue as normal.”
In a letter to the company’s employees, Smith stressed the importance of Chapter 11 reorganization for companies like Smitty’s, whose operations are viable but whose financial structures are overburdened.
Among Smitty's acquisitions over the last three years were Springfield, Va.-based Fairfax Millwork and Building Products and Manassas, Va.-based Shelter Systems.
“With Bank of America’s support through a post-filing loan facility, Smitty’s is poised to strengthen our business and continue to proudly serve our local market,” Smith said.
Smith also wrote a letter to Smitty’s approximately 1,500 contractor customers, explaining the company’s financial difficulties. “The unprecedented decline in the housing market, coupled with the debt associated with the acquisitions we made, has left us with too high a cost structure,” he explained. “The impact of these conditions on our financial performance has been harmful and has impaired both our capital resources as well as financing available to the company.”
He explained the company’s decision to file for Chapter 11 protection, saying it would allow Smitty’s to “move forward with the process of reorganization in order to be in a position to return to financial health.”
In addition, Smith provided vendors with important information about the reorganization and how it will affect how and when they get paid, how to file a claim and other issues.
Also on the company's Web site is a letter to vendors in which Smith explains the company's position. "While it is impossible to speculate about what the long-term effect of Chapter 11 will be on the business, it is important to recognize that staying out of Chapter 11, given the present conditions, might have led to a far worse situation -- liquidation which would likely offer no return to unsecured creditors," he said.
Bank of America is providing Smitty’s with a maximum line of credit totaling $10.5 million, including $3.75 million in post-filing debtor-in-possession financing.
Smitty’s is a supplier of building materials to home builders, remodelers and residential and commercial contractors. Smitty’s was No. 88 on HCN’s 2008 Pro Dealer Top 350 list with sales of $94 million in 2007.