Road Logistics

Will Loves Furniture’s brief story end in heartbreak?

But it’s likely Loves’ quarrel with the $2 billion trucking and warehousing giant Penske Logistics, a subsidiary of Bloomfield Hills-based Penske Corp., drove it to seek protection in bankruptcy court last week.

Penske Logistics declined to discuss the ongoing case.

Loves inked a deal with Penske Logistics in July for the company to manage shipping from its Warren warehouse as well as manage the operations of the 1 million-square foot operation at 6500 E. 14 Mile Road in Warren, according to a lawsuit filed by Penske Logistics in Oakland County Circuit Court on Jan. 5.

Loves quickly fell behind on its payment obligations to Penske Logistics. As of Dec. 29, Penske Logistics alleges, Loves owes $1.6 million.

In November, Penske Logistics notified Loves it intended to assert a warehouseman’s lien on the warehouse inventory, according to the suit. A warehouseman’s lien allows a warehouse operator to hold and sell goods in its possession to offset against any shipping, handling and storage fees owed.

Loves quickly made additional payments to stave off the lien, Penske Logistics alleges in the lawsuit, but not for long.

On Dec. 29, Penske Logistics issued another warning that it was exercising its lien on Loves’ inventory and would begin to sell goods on Jan. 23. Loves responded by revoking Penske Logistics’ employees access to the warehouse, the lawsuit alleges.

The lawsuit also says Loves was working to move the inventory out of the warehouse during the legal dispute. With no cash reserves, the inventory is the only thing of value Loves holds.

“In the last few days, Penske representatives have also observed truck traffic in and out of the facility, which likely indicates Loves beginning to unlawfully remove the goods from the warehouse,” the lawsuit alleges. ” … Loves is of the belief that the lien will not be available to Penske once the goods are no longer in the warehouse.”

The Chapter 11 bankruptcy filing by Loves came a day after Penske filed its lawsuit.

Newman told Crain’s the company is restructuring its debt in hopes of maintaining up to 12 stores in Michigan. The company is also going to seek court approval for a contract with Planned Furniture Promotions, “which will make inventory available to customers at attractive prices at a time when most furniture stores are struggling to maintain inventory,” Newman said.

Planned Furniture Promotions is an Enfield, Conn.-based events company that creates the “going out of business sale” marketing blitzes for companies to generate immediate cash flow.

But even if Loves manages to rid itself of its debt obligations in bankruptcy, it would re-enter a market in which it couldn’t succeed. The bankruptcy is merely a second chance at the same market. McLoughlin is skeptical the company will avoid Art Van’s fate — total liquidation.

“(Loves) wanted to retain the credibility of Art Van … to be a freestanding organization on the bones of Art Van,” McLoughlin said. “But if you look at the market conditions … the likelihood they will get inventory on a continual basis … I think the most likely outcome is liquidation.”

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