Home Valu pushed into bankruptcy by suppliers

  • Article by: JACKIE CROSBY and LORA PABST , Star Tribune staff writers
  • Updated: February 1, 2010 - 9:09 PM

Founder Rudy Boschwitz was unaware of the petition but said creditors will get "very little."

Three suppliers owed nearly $500,000 by Home Valu Interiors have moved to force the failed home remodeling company into bankruptcy.

In an involuntary bankruptcy petition filed Friday in U.S. Bankruptcy Court in Minneapolis, Herregan Distributors Inc., of Eagan, one of the country's largest flooring distributors, said Home Valu owes it $254,357. Florstar Sales Inc. of Romeoville, Ill., claims it's owed $196,227, and Hank's Specialties Inc. of New Brighton lists unpaid bills of $33,092.

Home Valu, based in Fridley, began liquidating inventory the second week of January, but had not made its own bankruptcy filing.

Former U.S. Sen. Rudy Boschwitz, who founded the company 46 years ago with his wife, Ellen, was not aware of the filing.

"It's a mistake on their part," he said. "Creditors will get very little -- if anything -- in bankruptcy."

Boschwitz added that he and his son, CEO Gerry Boschwitz, hoped to "work through our assets in a more reasonable manner," noting the assets would be worth more if the retailer "could dispose of them in a more logical manner," he said. "Now they're penalizing themselves and all the other creditors."

Boschwitz said the three companies were not the largest of Home Valu's creditors.

Attorney David E. Runck of Fafinski Mark & Johnson in Eden Prairie, who represents the companies, could not be reached for comment Monday. A message left on the phone of Herregan Distributors President Robert Link said he was out of town for the week.

George Singer, a partner at Lindquist & Vennum in Minneapolis, said involuntary bankruptcy filings "don't happen with great frequency." They often are used when creditors have been unable to collect their debts outside of court or when they want to have a trustee appointed.

"These creditors likely don't trust the process under which liquidation is happening," said Singer, who is not involved in the case. "They obviously are feeling, rightly or wrongly, that they're not going to have their claims addressed, and want a trustee to oversee the process."

Home Valu began to struggle as the housing crisis widened, and losses compounded as the recession lumbered on and credit became tight. Boschwitz said last month that the chain was "unprofitable" and that sales were about half of its peak of about $100 million in 2006.

The company closed or sold four outlets in late 2009, and had been operating six stores when it decided shut down the operation. It had been liquidating inventory online through auctionmasters.com and at its Fridley store.

Contractors and suppliers say they haven't been paid for months.

A subcontractor waits

Kent Norby, a subcontractor who installed cabinets and flooring for Home Valu's Drexel Interiors store in Madison, Wis., said payment for a handful of jobs last fall was sporadic. He would receive payments for smaller jobs, but not for larger ones, he said. Norby said he is still owed almost $16,000, even though he has spoken with homeowners who said they paid for his work.

On Friday, he spoke with Boschwitz, who told Norby he would check into whether company vans could be sold to repay subcontractors.

"When I talked to Rudy, he seemed genuinely concerned about paying everything off," Norby said.

Lance Scott, who is owed about $18,000 for installing flooring in apartment buildings, said he knows he won't get all of his money back but he wants to see the company make a good-faith effort to pay back as much as it can.

"There was so much money we were bringing in," he said. "Where is it all at?"

Jackie Crosby • 612-673-7335 • jcrosby@startribune.com Lora Pabst • 612-673-4628 • lora.pabst@startribune.com

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