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Published: Friday, 7/25/2008

State offers Norwalk Furniture loan; restart contingent on Comerica's OK

BLADE STAFF
Production halted last week in Norwalk, above, and at two other factories. Production halted last week in Norwalk, above, and at two other factories.
BRYNNE SHAW / AP Enlarge

NORWALK, Ohio - The Ohio Department of Development has offered a $2 million loan that would allow the closed Norwalk Furniture Corp. to resume operations.

But the firm's lender, Comerica Bank, which cut its line of credit to the furniture maker, would have to agree to let the firm resume operations and restore the line of credit.

Joe Mosbrook, a spokesman for Norwalk Furniture, said, "Comerica hasn't even returned our phone calls." The lender, he said, appears to prefer to liquidate the company and sell its assets rather than continue to extend credit under a new owner.

The factory shut its doors this week, idling 500 at its factory and headquarters in Norwalk; 50 at a plant in Cookeville, Tenn.; 300 at a factory in Fulton, Miss.; and truck drivers and sales staff at 57 stores selling the higher-end furniture.

"Every day that plant doesn't operate we're losing substantial amounts of money," Mr. Mosbrook said.

The company said it was caught off guard when Comerica cut off its credit and said the Huron County firm had to repay its loan immediately, Mr. Mosbrook said.

"It came with no warning, no explanation. We still don't know why," he said. "The company was meeting its loan obligation. In fact, we had paid down $2 million in debt in a two-month period earlier this year."

The spokesman said company executives believe that a meeting last month with the bank could have prompted the decision.

Norwalk, which, like its counterparts throughout the industry, has suffered a sales decline, presented a plan to restructure its loan with terms more favorable to the company. Shortly after, the credit was cut off, he added.

Comerica is deciding whether to allow a new buyer to acquire the company or simply force it to shut permanently and sell off its assets, said Domenic Aversa, acting president of Norwalk Furniture.

"If Comerica forces a liquidation of company assets, they will actually yield less money than they would if they accepted one of the many investment offers," he said.

The plant's assets have a book value of $36 million, and Comerica holds a lien on the property and machinery, Mr. Mosbrook said. But a recent appraisal by Norwalk Furniture shows the assets would fetch only about $9 million.

The firm, founded in 1902, makes custom furniture.

Ohio development officials said yesterday they would extend the loan to help potential buyers acquire the company and erase its $11 million debt to the bank.

"This puts us closer, but we really need Comerica to sit down and talk," Mr. Mosbrook said. So far, the bank hasn't been willing to do that even though several private-equity firms have made proposals that would keep the company going, he said.

Sara Snyder, a spokesman for Comerica, declined yesterday to comment on the bank's plans, saying client relationships are private.

About 400 union members employed by Norwalk Furniture were planning a protest today at Comerica's headquarters in Detroit, according to Mr. Mosbrook.

Norwalk Furniture's products are sold under the brand names Norwalk, J. Raymond, Joe Ruggiero Collection, and Hickory Hill. It has retail stores in the United States and Canada.

Workers say the company has been hurt by the long housing slump, the poor economy, and imports.



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