This article has been republished with the permission of Furniture Today USA.
Words: Thomas Russell
High-end case goods and upholstery manufacturer Harden Furniture has been sold to Big Shoulders Capital, a specialty lender in Northbrook, Ill., following an Article 9 foreclosure auction that was held by lender Gemcap Solutions.
The proceeding ends weeks of speculation about the ownership of the company, which was founded in 1844 and is one of the oldest furniture manufacturers in the country. The company was purchased by Miramar Capital in 2016, but CEO Greg Harden, a fifth-generation family member to run the business, remained a minority owner.
With the new ownership structure, Greg Harden’s equity stake in the corporation effectively could disappear, as the successful bidder will ultimately control assets held by Harden. This could end 174 years of family ownership in the company.
Big Shoulders Capital is a specialty lender that funds “small and middle market businesses across a variety of manufacturing and construction industries in the U.S.,” according to its website. “We quickly and creatively lend against and lease machinery and equipment in amounts ranging from $1 million to $15 million.”
During the transition to new ownership, Harden temporarily suspended its manufacturing operations here, which employ about 175 workers. A WARN Act notice announcing the closing was issued to both employees and the New York State Department of Labor, according to a statement issued by Harden Furniture. Harden said the company offices will be closed for the balance of the week during the transition to new ownership.
It was not clear when the company would reopen. A call to the company’s corporate offices was unanswered, and officials with Big Shoulders Capital and Gemcap were not immediately available for comment.
Greg Harden initially planned to bid on the company with a group of other investors. However, according to Harden, a tight auction deadline prevented competing bids at the auction. Harden said that efforts to organize a local bid continued up to the deadline.
In an email, Harden said, “I appreciate everyone’s interest over the past weeks’ challenges. We have a tremendously proud and talented staff here, and it has been a privilege to have worked with them.”
He added that it was likely that a local group of investors could have submitted the winning bid had Gemcap extended the bid deadline.
“Gemcap said no, and the bidder they had recruited to be the ‘stalking horse bid’ would only agree to a two day extension – and a $250,000 fee,” Harden said.
The financial struggles, Harden told Furniture Today, began almost as soon as Miramar Capital purchased its majority stake around June 2016.
“There was almost an immediate shortage of working capital, which was never addressed,” Harden said. “It just got more severe as the months went by. … Miramar put none of their own money in the company – everything was financed,” he added, noting that the loan held an interest rate of 20%. Harden said in late January that although the loan balance was lower than it was in 2016, there was more interest paid than principal.
Miramar Capital was not immediately available for comment.
Harden said the breaking point was in December, when Gemcap insisted on the Article 9 auction process.
Ironically, he noted, the company has been delivering orders and has been getting good support from its vendors.
The news comes after a challenging period for domestic manufacturers that have had to compete with less expensive Asian imports.
“For the past 20 years Asian imports have grown dramatically, and today imported product represents a material component of the industry,” Harden Furniture said in a statement issued Jan. 22 that also noted there are fewer domestic suppliers remaining.
“Ultimately, it was not the popularity of the brand or a shortfall in sales that triggered the Article 9 Auction, but rather an unsustainable capital structure that followed the June 2016 acquisition of the company by Miramar Capital Partners,” Harden Furniture said in a statement issued late Wednesday. “Funding for that acquisition had been provided by Gemcap Solutions and eventually the onerous terms of the loan, combined with a lack of investment on the part of Miramar Capital Partners resulted in a default.”