What’s next for Armstrong Flooring after filing for bankruptcy? Here’s what we know | Local company

East Lampeter Township-based Armstrong Flooring Inc. faces a series of crucial bankruptcy hearings starting this week.

Armstrong filed for Chapter 11 bankruptcy and reorganization on May 9, and late last week warned all of its employees that they could be permanently terminated as soon as June 17 if the company could not find a buyer. It is seeking Delaware bankruptcy court approval to sell assets and reorganize to settle $317.8 million in debt, including $160 million in long-term debt. Armstrong said he had assets worth $517 million. The company employs hundreds of people in Lancaster County.

Here’s what we know:

What’s next for Armstrong Flooring?

Two key hearings coming Thursday and June 3 are expected to result in a judge’s order for a schedule and procedures for the sale of the assets. Another hearing on June 9 brings together creditors to question Armstrong Flooring executives.

The company was approved for $24 million in debtor-in-possession financing to continue operating, but it was an interim order. A final decision is expected on June 3. Armstrong also has tentative approval to pay critical suppliers $9 million. He is seeking access to loans to pay critical suppliers. An additional $5 million will be submitted for approval on June 3.

If the proposed plans are approved, the company is on track for sale approval on June 20, with auction offers due on June 14.

I thought the idea of ​​bankruptcy was to have time to get the business back on its feet. Why is an auction planned?

Armstrong Flooring, which is publicly traded, said selling the company’s assets was the best way to maximize value for stakeholders. There are plenty of stakeholders, including companies and people who owe money as well as shareholders whose stock has generally traded below 50 cents a share since the bankruptcy, down from its peak of over $6.50 over 52 weeks.

Armstrong Flooring said it had to continue to maintain the value of the business. Its assets are not worth as much if the new owner has to start from scratch with the workers and the material supply chain.

Among its assets are seven manufacturing plants in three countries. Two plants are in Pennsylvania, one in the city of Lancaster and one in Beech Creek Township, Clinton County. There are factories in Illinois, Mississippi, Oklahoma and a factory in China and Australia. Factories in China and Australia are not part of the bankruptcy. It also has offices in Canada, which are part of the bankruptcy.

What details are available on this auction? When will it be? Who will bid?

It’s unclear who will bid – or if there will be any bidders. In court documents, Armstrong said there were two potential bidders he was in talks with. A court filing from its pre-bankruptcy lenders said the only expression of interest in certain assets is a non-binding letter of intent from a well-known liquidator.

Armstrong has set up a secure digital forum for qualified bidders to take a closer look at operational and financial documents.

Armstrong detailed in court documents his efforts to sell the business or enter into another arrangement. On Oct. 29, the company engaged investment bank Houlihan Lokey Capital Inc. to act as financial advisor in a process to sell and evaluate other strategic alternatives.

What does this mean for Armstrong Flooring workers in Lancaster County?

Despite a squeeze on its finances, the company says workers are continuing to produce flooring.

He confirmed that he always hires as part of his strategy to maximize his value for a sale. It’s unclear how the sale will affect the workers and whether the buyer will hire them and honor Armstrong’s contracts and benefits.

Late last week, the company warned employees that if there was no buyer, and maybe even if there was, they could be permanently laid off as early as June 17. . Without a buyer, the company said it would likely shut down operations. . And, even if there is a buyer, the new owner could cut jobs or even close the business and liquidate the assets.

What do the unions representing Armstrong workers have to say about all of this?

Union representatives did not respond to inquiries from TNL | Lancasters online.

In the event of bankruptcy, collective agreements can only be rejected or modified after the company has attempted to negotiate with the union. It is not clear if this happened. United Steelworkers Local 285 ratified a new three-year contract in March. Details were not available.

About 277 manufacturing workers in Mississippi and Lancaster are represented by various unions.

What does this mean for Armstrong Flooring retiree benefits?

Armstrong Flooring wants to end all post-employment benefits, including retiree life and health insurance, but will continue to make required payments until the case is resolved. , which is scheduled for the June 3 hearing.

As of January 2021, 2,043 retirees received life insurance and 1,028 retirees, 563 spouses and 72 surviving spouses received health insurance, Armstrong said.

Armstrong Flooring has two pension plans. One is the US Qualified Pension Plan, which was created in 2016 when Armstrong Flooring spun off from Armstrong World Industries. The plan has 315 retirees, according to bankruptcy filings, and is closed to new participants. It is insured by the Pension Benefit Guaranty Corp. and is fully funded with a surplus of $23 million.

The other retirement plan is the Unqualified Unfunded Retirement Benefit Equity Plan, also known as the United States Retirement Plans. There are only three active employees enrolled in the equity pension plan.

How and why did Armstrong Flooring get into this situation?

The COVID-19 pandemic, supply chain challenges and inflationary pressures and severe lender restrictions have been blamed for the current situation. Armstrong Flooring raised prices but couldn’t keep up.

“Put simply, the company’s rising costs have far outstripped its pricing power,” President and CEO Michel S. Vermette said in a bankruptcy filing.

He said the company started modernizing its operations and increasing its profits just before the pandemic hit.

He had “spent significant resources” when the COVID-19 pandemic hit with factory closures, supply chain issues and inflation. He sought out loans to stay afloat while pursuing a sale and those loans came with restrictions on how the money could be used and with milestones for a sale deal that couldn’t be completed.

Does this all involve Armstrong World Industries?

Not at all. Armstrong Flooring separated from Armstrong World Industries in 2016. Armstrong Flooring designs, manufactures, purchases and sells flooring products primarily in North America and the Pacific Rim. Armstrong World is a publicly traded international designer and manufacturer of walls and ceilings. It has a global manufacturing network of 26 factories. It announced double-digit growth in its first-quarter earnings report. In its quarterly report, the company said it posted net revenue of $282 million for the quarter, 12% year-over-year growth and operating profit growth of 17%. .

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