as Armstrong Flooring’s Chapter 11 bankruptcy sale nears a resolution, Michel Vermette, president and CEO, shared some encouraging news in a letter to staff.
Stating that there was “positive momentum” heading down the stretch, Vermette wrote: “We have received a number of proposals to acquire all or various parts of our business as a going concern. These potential ‘going concern buyers’ want to acquire—and operate—substantially all of our US and non-US business and assets. While we cannot share the value of the proposals nor the names of the potential buyers, we want to share our enthusiasm for this positive momentum.”
In a statement sent to FCNewsan Armstrong spokesperson said that in order to support these and other potential “going concern bidders” in finalizing their binding offers, Armstrong Flooring—with the support of its secured lenders and the Creditors Committee— extended its bid deadline from June 14 to June 23 .
Assuming more than one qualified bid is received, which is anticipated, an auction will occur on June 27 to determine the highest or best offer. Once the winning bid or bids are selected and approved by Armstrong Flooring’s board of directors, the company will present the winning bid or bids to the bankruptcy court at a hearing scheduled for June 29.
“Armstrong Flooring is open for business and remains firmly committed to our customers, vendors and employees as we navigate the path forward,” the spokesperson said. “We are confident that this definitive action puts us in the best possible position to preserve and maximize value for our stakeholders.”
On May 8, Armstrong Flooring filed for voluntary Chapter 11 protection in order to execute what it deemed “an efficient and value-maximizing” sale of the business. The company, which had been for sale months before its Chapter 11 filing, owes an estimated $318 million, including $160 million in long-term debt, and sought protection from lenders through bankruptcy. Armstrong Flooring received court approval to sell off its assets, which are valued at $517 million.
Bonus plan contested
In other action, Armstrong Flooring unions have challenged a plan by the company to pay bonuses to mid-level managers who stay through the bankruptcy sale process, saying it is unfair to union members who might lose their contract and benefits. On May 31, Armstrong Flooring asked a bankruptcy court to approve a $745,000 retention bonus plan to keep mid-level managers on board through the sale of the company.
Armstrong Flooring estimated the bonuses to as many as 50 “key personnel” would be an average of $14,900 per person. The bonuses would range from 8% to 12% of the annual base level salary of key people who executives and their consultants determined were important to assist in the sale and wind down of the company.
In an objection filed in bankruptcy court, attorneys for the United Steelworkers and International Association of Machinists and Aerospace Workers argued that the bonuses should be denied. The unions said the bankruptcy court judge should consider the bonus plan, called Key Employee Retention Plan, in context with $4.8 million bonuses given to key management days prior to the bankruptcy filing. That $4.8 million payout includes accelerated payment of 2022’s long-term incentives.
The Steelworkers’ union represents approximately 262 employees at its facilities in Lancaster, Pa., and Jackson, Miss. The IAM represents 17 employees in Lancaster as well as about 1,000 retirees currently receiving health and life insurance benefits from Armstrong.
According to the website Lancasteronline, the union noted that while Armstrong Flooring has said it wants to find a buyer that will keep the company operating as a going concern, it has recently sought authorization from a Delaware bankruptcy judge to reject all the collective bargaining agreements and suspend paying retiree benefits. Armstrong Flooring has said that it needs to end contracts because no buyer has indicated it would honor them. The company said if keeping the contracts were required of buyers it would not be able to close a sale.
Armstrong Flooring has notified 606 Lancaster County workers that they could lose their jobs between now and July 1.
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