A home furniture store now files an unexpected bankruptcy due to financial challenges that threaten its survival.
Home furniture company Oka abruptly closed its US stores after an abrupt Chapter 7 filing.
“What is OKA all about?
Simply put, it’s a love affair with living well.
Since the very beginning, we’ve been on a mission to create things that make time spent with friends and family more memorable.
We believe that’s the secret to living beautifully: enjoying it,” the company shared on its website.
However, the company sells more than furniture.
It’s a lifestyle brand that covers the entire house.
The company has already closed its American operations, which it shared with customers in a statement on its website.
“As a result of the Chapter 7 filing, we have ceased all business operations in the US effective immediately.
As such at this time, we are no longer accepting new orders via our US website or stores,” the company shared.
While OKA has given up its US operations, it has a plan to survive in the United Kingdom.
The company has filed in UK courts for a Company Voluntary Agreement (CVA), a kind of variant of a Chapter 11 bankruptcy filing.
If approved, the CVA would allow the company to keep operating in order to pay off its debts, according to Sky News.
“The deal would see Oka shutter one of its 13 U.K. stores; the company would also likely lay off up to 40 of its 250 remaining employees, and the article reports that a distribution center and a head office would be ‘affected’ by the move,” Business of Home reported.
Its US operations, which included stores in Houston, Dallas, and Westport, Conn., were closed as part of a separate Chapter 7 bankruptcy filing, made on June 11.
No liquidation plans have been shared for those locations.
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Also Read: Another Mall Clothing Retailer Now At High Risk of Bankruptcy
Other Economy News Today
An essential company now files a surprising bankruptcy after miscalculating demand for its inventory after the Covid-19 pandemic.
Supply Source Enterprises, a leading provider of branded and private label cleaning products and personal protective equipment, on May 21 filed for Chapter 11 protection to seek a sale of its assets.
Supply Source brands include The Safety Zone and Impact Products.
The Guilford, Connecticut debtor listed $50 million to $100 million in assets in its petition and $180 million in funded debt, which includes $80 million owed on a term loan credit facility, $60 million owed on an asset-based loan, and about $40 million in unsecured debt.
Before the Covid-19 pandemic, which generated huge demand for cleaning supplies and personal protective equipment in 2020, Supply Source had been consistently profitable with stable single-digit growth, according to a declaration from the debtor’s Chief Restructuring Officer Thomas Studebaker.
Once the pandemic hit in 2020, the debtor had substantial growth due to high demand for safety, hygiene and sanitation products
The debtor reported adjusted Ebitda of $93 million in 2020 which was nearly a 300% increase over the previous year.
However, the company’s financial performance deteriorated in subsequent years.
Based on the unprecedented demand in 2020, the company commissioned an industry study in early 2021 that concluded that the Covid-19 pandemic would fundamentally change the cleaning supplies and protective equipment industry and market for its products.
The study also estimated that the company’s Covid-related growth would likely be sustained through 2024.
In contemplation of continued customer demand at elevated prices, based on the study’s data, the debtor increased purchases of inventory even though the costs were higher due to supply chain constraints during the pandemic.
Despite the study’s assurance that growth would be sustained for years, the pandemic’s positive effect on the market faded by the end of 2021 and demand for PPE decreased to normal rates, reports TheStreet.
The reduction in demand led to large amounts of excess inventory that the company could not sell in the same quantities and prices.
The excess inventory forced the debtor to secure additional storage space, which increased storage costs.
These factors tightened the company’s liquidity and led to a decline in annual revenue in 2023 by 26% from 2022, resulting in a negative 2023 Ebitda of $13 million.
The debtor’s liquidity issues led to it being overdrawn on its asset-based loan facility by $30 million.
The ABL lender in February 2024 swept the debtor’s bank accounts, further impacting the company’s financial distress.
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Also Read: This Massive Mall Retailer Is Now Closing In California
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About The Author
Many businesses are claiming bankrupcy even when economies are “doing well”. Aside from restaurants, which haven’t been able to find enough employees (in US anyway) and can’t raise costs enough to cover higher expenses, I wonder how many of these are “zombie companies” that depend on cheap borrowed money to operate. They only make enough profit to cover interest, not principal. One was Bed, Bath, and Beyond – I saw their previous CEO made $17M a few years ago.
This seems to be a poor business model for too many companies over the past 20 years. When rates go up, they can’t operate. It’d be good if higher rates clear them out, but they employ a LOT of people.
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