Armstrong Flooring Inc. has secured $24 million in loans that will keep it operating as it reorganizes and pursues a sale of its assets, the company’s attorneys told a Delaware bankruptcy judge Monday.
The loans will come from Armstrong Flooring’s pre-bankruptcy lenders, Bank of America N.A. and Boston-based Pathlight Capital, which had been pressing for repayment that Armstrong Flooring feared would lead to an immediate shutdown. Armstrong had turned to JMB Capital Partners Lending LLC of California for $30 million debtor-in-possession financing.
Armstrong still has to pay $675,000 in fees to JMB Capital.
The debtor-in-possession financing order is pending a 9 a.m. deadline Tuesday for any objections. The financing is needed in order for Armstrong Flooring to avoid liquidation and keep its 420 Lancaster County workers on the job. It now has time to craft a plan to address its debts, and a hearing on those details is set for June 3. The company will also keep seeking a buyer.
On Monday, Judge Mary Walrath heard from attorneys regarding payments to certain vendors and sealing some financial information from the public.
Attorneys for Armstrong said in court and in bankruptcy documents that time was of the essence to keep supplies coming in and products going out to distributors and other key accounts.
“I understand from conversations with management, that in the past week, a number of the Debtors’ stakeholders have expressed concerns over the Debtors’ ability to continue to perform and satisfy obligations in the ordinary course,” wrote Jeffrey Lewis, managing director of investment bank Houlihan Lokey, which has been advising Armstrong Flooring on the sale. “Without certainty of financing, and therefore, certainty of payment, a number of the Debtors’ vendors have, at least temporarily, stopped shipping goods.”
The debtor-in-possession financing is a $12 million term loan and $12 million revolving credit loan. The term loan is secured by equipment, intellectual property and real estate, while the revolving loan is secured with inventory and receivables. A revolving loan is a credit that allows the borrower to withdraw, repay and withdraw again.
The terms of the loans are more flexible than the company’s pre-bankruptcy loans.
East Lampeter Township-based Armstrong Flooring has $317.8 million in total debt and $160.5 million in long-term secured debt.
Armstrong Flooring does not have enough money to keep going so it wanted to avoid extended legal wrangling and finalize the debtor-in-possession financing.
It took a week to nail down details after Bank of America N.A. and Pathlight Capital had challenged the $30 million debtor-in-possession loan offered by JMB Capital. The challenge involved which lender would be first in line to be paid back if the company were to collapse and face liquidation. Now the arrangement keeps Armstrong Floorings’ two original lenders at the head of the line.
Armstrong Flooring is a 160-year-old leading global producer of resilient flooring products used primarily in the construction and renovation of commercial, residential and institutional buildings. Spun off from Armstrong World Industries in 2016, Armstrong Flooring designs, manufactures, sources and sells flooring products primarily in North America and the Pacific Rim.
Armstrong employs about 420 between plant and corporate offices in Lancaster County, down about 80 people since December 2020.
The company has lost at least 100 employees in key departments since March 1, according to its bankruptcy filing. It asked the court to redact employee addresses to prevent the poaching of workers, which would jeopardize its ability to operate.
The company employs 1,212 people in the United States, four in Canada and 495 in nondebtor affiliates in China and Australia.
Approximately 277 manufacturing employees in Mississippi and Lancaster are represented by various unions.
Union representatives could not be reached for comment Monday.