Bankruptcy court approves $40M sale of LL Flooring assets to Lumber Liquidators founder

The LL Flooring brand replaced Lumber Liquidators in 2022 (BizSense file photo)

Bankrupt LL Flooring is a step closer to being sold to its founder and former CEO in a deal that will keep about half of its stores and employees intact.

The Henrico-based retailer on Monday received approval from U.S. Bankruptcy Court Judge Brendan Shannon to move forward with a “going-concern” sale to an affiliate of F9 Investments, a private equity firm run by Thomas Sullivan, who founded LL as Lumber Liquidators 30 years ago.

The deal calls for F9 to retain 219 of LL’s 430 stores, its intellectual property, as well as the store’s inventory and that of the company’s massive distribution center in Sandston. F9 also agrees to save the jobs of up to 1,000 LL employees.

In exchange, the LL bankruptcy estate expects to receive cash consideration of $40 million-$43 million from F9, according to court documents.

With the judge’s blessing in hand, it’s now up to the two sides to consummate the deal, which is expected to close by Sept. 30.

Once the deal is finalized, LL will be helmed by Jason Delves, president and CEO of F9 affiliate F9 Brands, court records state. Delves has more than two decades in the flooring and retail industry and has served as executive officer of various subsidiaries of F9, including Cabinets To Go, Southwind Building Products, LLC and Gracious Homes.

Included in the intellectual property that F9 would acquire is the rights to the original Lumber Liquidators name, which it plans to revive.

“F9 Brands’ focus has been and continues to be restoring Lumber Liquidators as an iconic brand in the flooring industry,” Delves said in a filing with court.

Sullivan has previously criticized the company’s rebrand from Lumber Liquidators to LL Flooring. It was done after Sullivan’s departure from the company in an effort to leave behind the baggage of bad publicity from a damning “60 Minutes” report in 2015 and subsequent legal issues. However, executives have since admitted that the LL Flooring brand never caught on with consumers.

Also approved by Judge Shannon on Monday was the sale of LL’s most valuable asset: its 1 million-square-foot distribution center in White Oak Technology Park in eastern Henrico.

An entity tied to data center giant QTS is the buyer and has agreed to pay $104 million for the sprawling property and its 97 acres at 6115 Technology Creek Drive.

That sale also is expected to close by Sept. 30. JLL represents both sides of the deal.

LL bought the property as raw land from the Henrico Economic Development Authority in 2013 for $4.88 million, before building the distribution center. It was most recently assessed by the county at $73 million.

As part of the deal, LL will continue to lease 616,000 square feet in the building for two years. It agrees to pay $334,000 a month in rent for the first year and $345,000 per month in the second year. That amounts to $8.1 million over the course of the lease.

F9 said it eventually plans to move LL out of the Sandston building into a new-construction distribution center it plans to erect on land next door to F9’s existing distribution center in Tennessee.

The company’s massive distribution center in Sandston. (Courtesy JLL)

It’s unclear what the sale to F9 will mean for LL’s Henrico headquarters in the Libbie Mill development. Sullivan has previously criticized the company’s move to that building as an unnecessary expense.

F9 said in court filings that its has been in contact with LL vendors and has met with employees and is “preparing to deliver offer letters to employees, thereby providing employees with certainty during the transition.”

LL’s other 1,000 employees are expected to be laid off, while its remaining 211 LL stores that are not being purchased by F9 will be liquidated in closing sales that are ongoing.

The proceeds from those sales, as well as the $104 million from the sale of the Sandston property will go to the LL bankruptcy estate and used to pay off the company’s creditors.

The company’s Chapter 11 bankruptcy process will continue after the closure of the sales, as F9 has created new entities with which to operate the assets it is acquiring.

The sale to F9 would help bring an end to a disjointed Chapter 11 case that saw LL enter bankruptcy protection on Aug. 11 with an initial plan to find a buyer for the business, only to announce earlier this month a plan to pivot into a full-on liquidation to go out of business entirely. Then days later it backtracked by announcing it had reached an 11^th hour deal with Sullivan and F9.

The sale would put control of much of the company back into the hands of Sullivan, who founded it as Lumber Liquidators in the mid-1990s in New England. Under Sullivan’s leadership, Lumber Liquidators went public on the New York Stock Exchange in 2007, grew to hundreds of stores and saw its stock price peak at $119 per share.

But then the company’s fortunes began to sour in 2015, after the “60 Minutes” exposé related to claims of unsafe levels of formaldehyde in flooring it had imported from China. It also pleaded guilty in 2015 to federal environmental crimes related to its imports from the Russian Far East. Sullivan left the company a year later in 2016.

Its fortunes and stock price had been on a steady decline ever since, particularly over the last two years as the company turned down several offers from prospective buyers, including F9. Earlier this year it revealed in its earnings statements that its ability to continue to operate was uncertain.

It posted a loss of nearly $29 million in the first quarter of this year, on top of an annual loss of $103 million in 2023, and disclosed that it only had $8 million of cash on hand with which to operate.

Sullivan and F9 have been trying to nearly two years to purchase LL, only to be rebuffed at every step. F9 remains LL’s largest shareholder, though those shares are now worth nearly nothing in light of the bankruptcy.

The post Bankruptcy court approves $40M sale of LL Flooring assets to Lumber Liquidators founder appeared first on Richmond BizSense.