Whitney Design Files Chapter 11, New Company Formed To Purchase Assets

Whitney Design today announced that it has filed a voluntary petition under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for Eastern District of Missouri. Subject to Court approval, Household Essentials, LLC, a new company affiliated with Whitney’s senior management, will purchase Whitney assets.
According to a statement from the company, the U.S. Department of Commerce recently determined that one of Whitney Design’s Chinese suppliers had been dumping products into the United States in violation of international trade law. As a result, the Commerce Department assessed anti-dumping duties retroactive to 2004.
The company indicated in its statement that, “This determination came as a complete surprise to Whitney because the Chinese factory had been thoroughly audited by the Commerce Department in the past and had received a 0% duty rating for two consecutive years.”
Under U.S. law, the importer of record is liable to pay the duties if its supplier is illegally dumping product. Whitney immediately terminated its relationship with the Chinese supplier after the determination, but Whitney still faces millions of dollars of potential liabilities associated with the duties, according to the company. Whitney indicated that while it can challenge the imposition of these duties, “the appeal process is lengthy and very expensive.”
“We strongly disagree with the duties imposed and the retroactive penalties,” said James L. Glenn, Whitney’s president in a prepared statement. “However, we have worked out a program that will resolve these issues without affecting our customers, employees and other suppliers.”
Before filing the Chapter 11 petition, Whitney lined up debtor in possession financing with Enterprise Bank & Trust Company that will enable Whitney to operate its business and satisfy all of its obligations during the Chapter 11 case. Whitney will file a motion to approve the sale of all of its assets to Household Essentials LLC free and clear of the anti-dumping duties. Enterprise Bank and Eagle Fund I, LP, Whitney’s two principal creditors, support the sale to Household Essentials, according to the company statement. Whitney’s Orient based suppliers also support the sale. Whitney said it expects the sale to close in the first quarter of 2010.
Glenn will be the CEO and president of Household Essentials. Mark Brown, current senior vice president of finance and chief financial officer of Whitney Design, will also continue to serve in that same role with Household Essentials. Glenn and Brown have been actively engaged in the management of the business for more than 15 years.