The historic Weeks plant in northwest Winston-Salem could have its newest owner as soon as Aug. 1 upon the projected completion of a federal bankruptcy auction.
The U.S. Bankruptcy trustee for United Furniture Industries said in a June 20 filing that a “stalking horse” is willing to pay $65 million in cash for the defunct manufacturer’s four Triad properties and 15 overall.
A “stalking horse” is the term used to describe a bidder who sets a minimum price for the assets. Companies hope that other bidders will emerge with higher offers.
Trustee Derek Henderson named Phoenix Acquisition of Milwaukee, which specializes in buying and renovating manufacturing plants, as the potential purchaser.
An auction is scheduled for July 25 in Memphis, Tenn., and a court hearing to approve the sale for Aug. 1. Property closings are expected to take place in late August
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When Hanes Hosiery Mills Co. opened the Weeks plant in 1960 at 401 E. Hanes Mill Road, it was the largest manufacturing plant in North Carolina. Hanes Hosiery spent about $30 million on the plant, which would be about $308.2 million in 2023 dollars, according to calculations from the U.S. Bureau of Labor Statistics.
The plant currently has 755,599 square feet of space on a 54.5-acre tract. It’s the largest single piece in the United Furniture operational portfolio.
United made promotional- to mid-priced upholstered furniture in the U.S. under its brand and the Lane Home Furnishings brand. The manufacturer also imported wooden bedroom and dining furniture.
After more than eight years of operations at the Weeks plant, United unexpectedly shut down all of its plants in late November, ending employment and health insurance benefits for 530 Triad employees and about 2,700 companywide.
At that time, United had a combined 245 employees in Archdale and Trinity, 220 in Lexington and between 50 and 70 in Winston-Salem.
After facing pressure from creditors led by Wells Fargo & Co. for an involuntary bankruptcy filing, United submitted in February its Chapter 11 federal bankruptcy filing, citing between 200 and 999 creditors, and between $1 million and $10 million in assets and liabilities.
Phoenix Acquisition, which has a Greensboro property and two others statewide, would be acquiring the 15 United properties — 10 are in Mississippi — and the accompanying 626 acres in their current conditions.
United’s board of directors delivered the shocking news to employees of the manufacturer’s collapse in two late-night emails — the first at 11:49 p.m. on Nov. 21 and the second at 12:42 a.m. on Nov. 22.
The first email read: “We ask that all employees not report to their work locations tomorrow Nov. 22, 2022.”
The second email informed employees that “your layoff from the company is expected to be permanent and all benefits will be terminated immediately without provision of COBRA.”
The company ended the memo by noting it was a “difficult and unexpected situation.”
During the first of five Triad job fairs held in December focused on United employees, Casia Cordova told the Winston-Salem Journal that “we feel, I feel, very betrayed by the company and its leadership.”
Cordova was a 31-year veteran with United, first in Mississippi and then the past five years in Lexington.
“Once I realized it was really happening, my heart just dropped. We felt like deer in the headlights,” Cordova described. “I had all the feelings you can imagine just rushing over me.”
According to one estimate, the United job cuts were among the largest involving U.S. manufacturers so far in 2022 next to technology and financial services companies.
Wells Fargo, United’s largest creditor, filed on Dec. 30 a motion for Chapter 7 liquidation of the manufacturer’s assets and the appointment of a bankruptcy trustee.
On Jan. 18, federal bankruptcy Judge Selene Maddox issued a ruling giving owner David Belford and United the opportunity to direct the sale of its assets in a Chapter 11 bankruptcy protection motion.
Maddox said in her memorandum and order that Belford and the United board of directors did not “rise to the level of bad faith” in their decision to shutter operations.
However, she wrote that “its management made serious errors in business judgment and displayed clear financial incompetence.”
Wells Fargo said it is owed $99.2 million in secured debt. Yet, the bank acknowledged it “estimates that any recoveries from liquidation of (United’s) collateral will result in a recovery equal to a fraction of this amount.
United never filed a WARN notice related to shuttering its operations in California, Mississippi or North Carolina. WARN — short for Worker Adjustment and Retraining Notification — requires employers to give advance notice in the event of a plant closing or mass layoff.
As a result, five separate employee WARN Act lawsuits were filed in November and December in California and Mississippi.
The WARN act lacks enforcement teeth, with several studies showing lots of loopholes and virtually no enforcement authority from federal, state and local officials.
In those instances, employees must file a lawsuit in federal court to assert WARN rights. The former employees are requesting class-action status.
Besides the WARN Act, the California plaintiffs claim United violated the North Carolina Wage and Hour Act and two California labor codes. The North Carolina law requires employers to pay final wages to discharged employees through the regular payroll method on or before the normal payday.
United has said that although a WARN notice wasn’t initiated, the company denies that it “violated the act and/or any state law because the shutdown and layoffs were due to unforeseen business circumstances, as well as the inability to obtain financing.”
United had been approved for up to $130 million in credit by Wells Fargo. Any advances on the credit were secured by all of United’s properties and other assets.
However, Wells Fargo said it was given “little prior notice” on Nov. 21 from United officials that they “needed substantial capital immediately, over and above amounts that would be in compliance with the credit facility between the parties, or it would not be able to fund continued operations.”
Bank officials told United they “could not agree to the request … on such short notice without additional information, including a budget for restructuring purposes and internal credit committee approval at Wells Fargo.”