US based vacuum cleaner manufacturer Oreck has filed for Chapter 11 bankruptcy protection this week leaving the future of the long standing cleaner maker in doubt as the original family owners attempt to buy back the business.
The Tennessean reports the company expects to continue daily operations without interruption and is looking for a buyer.
Oreck laid off an undisclosed number of employees last October and again in January, saying the move was part of a shift away from direct sales.
Oreck has about 70 employees in the corporate office in Nashville, another 250 work at its Cookeville manufacturing plant and about 325 work at its retail stores.
Oreck sells its upright vacuums and other cleaning products in hundreds of Oreck Clean Home Centers, as well as through direct phone and online sales. It sells vacuum cleaners under the Oreck brand in the USA, Canada and parts of Europe including the UK.
A video report from WGNO is below.
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However later reports indicated that members of the Oreck family are trying to buy the Nashville-based vacuum and cleaning supply company.
Thomas Oreck, the son of founder David Oreck and the CEO of the company from 1997 to 2007, is leading the family’s negotiations to purchase the company when it exits bankruptcy.
Oreck said a formal offer isn’t complete but that the family was “working diligently to negotiate a deal that would benefit the company.” Oreck has declined to provide details of the negotiations, and would not disclose the value of the offer or even say when discussions started.
Oreck said he was asked to leave the company in 2007 by the controlling shareholder at the time, private equity firm American Securities, because he didn’t agree with the direction the firm wanted Oreck to take. The company was still profitable at the time, he said.
William Norton, the attorney representing Oreck in its bankruptcy proceedings, said the company would likely be filing a motion for sale of its assets by the end of the week, he said he anticipated a sale agreement would be filed within a few weeks.
Oreck Corp. and eight related entities filed for Chapter 11 protection on Monday, saying in court filings that it was in a “precarious financial position” and that sales had been declining since 2010, in part due to increased competition in the vacuum market and the decline of the specialty retail market.
There are more than 300 Oreck specialty stores, 96 of which are company-owned.
The filings also cited delays and excessive costs associated with shifting the company’s marketing and product strategy. The company recently released several new products, launched a national advertising campaign and began selling its products through more major retailers as it began to shift away from its traditional emphasis on direct sales.
However, according to filings, Oreck isn’t able to “generate enough cash to cover expenses as they arise.”
As part of its bankruptcy plan, it intends to borrow $11 million through debtor-in-possession financing, a special form of financing provided for financially distressed companies under Chapter 11.
The filings note that the company has suffered from a “serious exodus of management.”
Former CEO Doug Cahill resigned in March after making several unsuccessful attempts to buy the company from its controlling shareholder, asset management firm Black Diamond Commercial Finance, an affiliate of Black Diamond Capital Management, he said.
Black Diamond acquired Oreck when it bought substantially all of the assets of GSC Group, Oreck’s previous owner, out of bankruptcy in 2010.
Cahill said that as a distressed asset firm, growing companies “wasn’t (Black Diamond’s) business model,” After being unable to buy the company and concluding that Black Diamond wasn’t “a supportive sponsor” for the company’s current approach, Cahill said, he resigned.