Smitty’s files for protection under Chapter 11
Smitty’s Building Supply filed for protection under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of Virginia, located in Alexandria, Va.
At the time of the Jan. 5 filing, company CEO Rick Smith stated that the unprecedented decline in the housing industry caused his company to take this action. Smith emphasized that “our business will continue as normal.”
In a letter to the company’s employees, Smith stressed the importance of Chapter 11 reorganization for companies like Smitty’s, whose operations are viable but whose financial structures are overburdened.
“With Bank of America’s support through a post-filing loan facility, Smitty’s is poised to strengthen our business and continue to proudly serve our local market,” Smith said.
Smith also wrote a letter to Smitty’s approximately 1,500 contractor customers, posted on the company’s Web site, explaining its financial difficulties. “The unprecedented decline in the housing market, coupled with the debt associated with the acquisitions we made, has left us with too high a cost structure,” he explained. “The impact of these conditions on our financial performance has been harmful and has impaired both our capital resources as well as financing available to the company.”
He explained the company’s decision to file for Chapter 11 protection, saying it would allow Smitty’s to “move forward with the process of reorganization in order to be in a position to return to financial health.”
Bank of America is providing Smitty’s with a maximum line of credit totaling $10.5 million, including $3.75 million in post-filing debtor-in-possession financing.
Headquartered in Alexandria, Va., Smitty’s is a supplier of building materials to home builders, remodelers and residential and commercial contractors. Smitty’s was No. 88 on HCN’s 2008 Pro Dealer Top 350 list with sales of $94 million in 2007.