Oreck Corp., known for its lightweight vacuum cleaners, announced has filed for Chapter 11 bankruptcy protection. The Filing is an effort to sell the company and daily operations will continue without interruption.
A Chapter 11 filing will allow Oreck to consolidate its assets and restructure its finances as part of an effort to sell the business, the company said in a statement released Tuesday.
The statement provided few details, and the company didn’t respond to interview requests, but Oreck’s bankruptcy filings paint a picture of a struggling company fighting to survive amid management departures and falling sales.
According to court filings, Oreck, along with eight affiliated entities that filed for Chapter 11, “are in a precarious financial position.” The company is losing money, sales “are quickly deteriorating,” the filing states, and it “simply cannot generate cash fast enough to cover expenses as they arise.”
Oreck’s former CEO Doug Cahill said he left in March after making several unsuccessful attempts to buy the company from its owner, Black Diamond Capital Management, an asset-management firm with offices in Connecticut and Illinois. Cahill said he felt the firm wasn’t supportive of the strategy he wanted to pursue.
“I didn’t like the direction they were taking or how they were dealing with us,” Cahill said, “so I resigned.”
He said he was saddened by what was happening.
“It’s hard to believe a 50-year-old company can be in this bad of shape in 50 days,” he said.
To maintain operations, Oreck intends to borrow $11 million through debtor-in-possession financing, a special form of financing provided for financially distressed companies under Chapter 11.
The company said in filings that it could reach an agreement to sell “substantially all” of its assets in the next several days, but that the deal was not a certainty.
“If a deal is not reached,” a filing says, “it is possible that a liquidation and wind down of the Debtors may ensue.”
Oreck said in its statement that the company will continue daily operations without interruption.
“Oreck will continue to operate in the ordinary course of business while the sale process takes place, with authorized and exclusive dealers and other trade customers continuing to receive product for sale to ultimate consumers,” the company said.
According to a forecast it submitted in its filings, Oreck expects to have a negative cash flow of nearly $3.2 million during the next three months.
Oreck laid off an undisclosed number of employees at the end of January, as well as in October 2012.