The Urethane Blog
August 24, 2023
Here’s how Art Van heirs, trustee settled bankruptcy lawsuit
Thomas Lester//Retail Editor//August 24, 2023
WILMINGTON, Del. — An $8 million settlement in federal bankruptcy court was reached on Aug. 23 between heirs of Art Van Elslander and trustee Alfred T. Giuliano, in relation to defunct retailer Art Van Furniture’s sale to private equity in 2017.
Under terms of the settlement, the majority of the settlement will be paid by National Union Fire Insurance Company. The agreement is not an admission by the parties of any of the allegations made, and the trustee released the defendants from all claims.
“Thanks to the parties for working through the issues. This obviously looks like a very sensible resolution,” Judge Craig Goldblatt of U.S. Bankruptcy Court in Delaware said last week when approving the settlement, according to The Detroit Free Press.
Gary Van Elslander, the son of Art Van Elslander, told The Free Press that the family is glad that the suit was settled, but it remains a painful final chapter for the family and employees of the former Warren, Mich.-based retailer.
“Who I feel really bad for is the employees of Art Van,” he told reporter J.C. Reindel. “My father always said that the heartbeat of the company was the people, and that was a fact — and they probably got hurt worse than anyone. The Van Elslander family, our feelings were hurt, my father’s legacy was hurt, but the pain that the employees felt was real, and that I think we probably feel worse about.”
Gary Van Elslander told The Free Press that, ultimately, the push for expansion and bringing in outside leadership helped doom the company.
“I think along the way that some of the culture of the business was lost,” he said. “We had a very driven culture, very hands-on among the executive team with our retail stores, and I think a lot of that was lost. There was management that was hired that was from outside the Detroit area. They really didn’t understand the legacy and the brand of Art Van Furniture as well as they could have, didn’t put enough importance on it.”
In the original complaint, filed March 7, 2022, Giuliano sought to recover more than $105 million in “fraudulent transfers” and more than $84.7 million in certain real properties, among recoveries.
The complaint alleged that Art Van’s sale to Thomas H. Lee Partners in 2017 for $620 million was a highly leveraged transaction, accomplished by stripping the value out of the debtors’ owned real properties and saddled the debtors with an unsustainable debt load for the benefit of the defendants and detriment of the debtors and their creditors.
It stated that prior to the acquisition, Art Van paid less than $23 million per year in total lease obligations and had $136.5 million in total future lease obligations. After a spate of sale/leaseback transactions, the debtors’ minimum lease obligations ballooned to $46 million per year and more than $877 million in total future operating lease obligations.
On March 8, 2020, Art Van filed for relief under Chapter 11 of Title 11 of the United States Code with the U.S. Bankruptcy Court for the District of Delaware. In April 2020, the Chapter 11 cases were converted to Chapter 7.
Just prior to beginning bankruptcy procedures, Art Van ranked No. 14 in Furniture Today’s 2020 Top 100 with $1.043 billion in sales across 192 stores in 2019.
“Eerily Simlar to Klaussner . . . “
August 23, 2023
US New Home Sales Soar To 17-Month Highs In July As Mortgage Rates Spike
by Tyler Durden
Wednesday, Aug 23, 2023 – 10:08 AM
After the disappointing (but not unexpected) decline in existing home sales, new home sales – of course – saw a big upward surprise 4.4% MoM surge in sales, leaving year-over-year sales up an astonishing 31.5%…
Source: Bloomberg
The divergence between new and existing home sales continues to gape wider…
Source: Bloomberg
As a reminder, we have seen huge downward revisions to new home sales figures this year…
Source: Bloomberg
Supply continues to shrink…
Source: Bloomberg
…which helped push median new home sales prices back up in July – even as mortgage rates began to spike…
Finally, we note the dramatic gap between the current 30Y mortgage rate and the effective rates that borrowers are currently paying on their home loans…
Source: Bloomberg
The gap hasn’t been this wide since the early 1980s – which helps explain why inventories of existing homes for sale are so low… and thus ‘new homes’, subsidized by homebuilders, is the only option for many.
That’s quite subsidy…
Are home-builder stocks starting to catch on?
But how long can homebuilders continue bleeding profitability to fill that gap?
August 21, 2023
Jiahua announces a 20 Million USD expansion of North American operations
Jiahua announced today the expansion of their North American operations through the establishment of
our facility in Northern Mexico in Ramos Arizpe, Coahuila State. The new plant is owned by Jiahua’s US
subsidiary JCI Advanced Materials. The plant is set on 40,000 Sq meters of land with the initial factory
building being 5000 Sq meters. The plant is designed with 8 production trains that include mixing,
chemical reaction and storage of finished chemical products.
Jiahua is known as a leader in China in the area of Alkoxylation with 1.4 million metric tons of capacity in
6 different cities in China. This investment in North America is part of a globalization strategy being
employed currently by Jiahua. The main products of Jiahua are polyether polyols, amines and PCE’s
used in cement and admixtures, and surfactants used in a variety of applications.
Jiahua’s effort in the Americas has been underway for the last 4 years though it’s US subsidiary JCI
Advanced Technology. JCI has quickly established market share in the polyether polyol space through
development and implementation of a logistics and customer service network across the USA that
included shore tanks and a rail fleet. “As customer service is core to JCI’s value proposition, the
onshoring of the supply chain through the new plant in Mexico is just the next logical step in our growth
in the America’s” stated Timothy Earl Madden, CEO of Jiahua US Holdings and JCI Advanced Technology.
He added “while we focus on bringing up the Mexico plant by February 2024, we are also taking
additional steps that will further shore up our position in the Americas”.
About Jiahua: JIAHUA CHEMICALS INC. is a global chemical company based in Shanghai China. Jiahua is
dedicated to the research and development, production and sales of ethylene oxide and propylene
oxide downstream derivatives and other specialty chemicals. The company has set up five business
units: Construction Chemicals, Performance Materials, Care Chemicals, Coating and Industrial additives,
and Functional Materials. The products are widely used in construction, automobile, home furnishing,
coatings, oil fields, textile printing and dyeing, pesticides and other industries.
August 20, 2023
Takeaways from State of Freight: A surprising volume increase in July
Also in the discussion with FreightWaves CEO Fuller: Capacity hanging in there, contract rates stickier than expected
· Thursday, August 17, 2023
Listen to this article
0:00 / 6:56BeyondWords
With the doors open at FreightWaves headquarters in Chattanooga, Tennessee, to outside visitors who wanted to witness in person the August State of Freight webinar with CEO and founder Craig Fuller — the first time for that — a market Fuller called the most “opaque” he had ever witnessed was the focus Thursday.
July was a month in which a trucking company that had been around for almost 100 years imploded. But the collapse of Yellow, unlike its role in the July webinar, was a relatively minor part of this month’s discussion. (July’s State of Freight webinar also featured extensive discussion about a possible strike at UPS (NYSE: UPS), which did not occur).
Instead, the August chat between Fuller and FreightWaves Director of Market Intelligence Zach Strickland, sponsored by Prologis (NYSE: PLD), kicked off by focusing on some bullish data that came at an odd time of the year.
It was a hot July for more than the weather …
Freight volumes generally decline or are flat in July, Fuller said. “We’ve got this anomalous environment with the tender volumes,” he said, citing the Outbound Tender Volume Index in SONAR. And outside of July 2020, which was another anomaly as the economy climbed back from the depths of the pandemic, OTVI never increases in July. But it did this year.
“If you go back historically, July is a pretty soft market,” Fuller said. He cited as reasons some usual factors — people take vacation around July Fourth — but others that might be less obvious, like the fact that July is a time when auto manufacturers close down some manufacturing lines as they retool for a new model year. Back-to-school merchandise, Fuller said, “has already moved into the distribution centers, so it is really a month where most people take off.”
But OTVI did not react normally this year, Fuller said, “and it’s telling us something is different about this freight economy.” OTVI exited June at 10,670.78; it finished up July at 11,211.4.
One possible reason for the recent strength in OTVI: the impact of federal infrastructure spending making its way into the economy more than a year after the Biden administration’s legislation was signed. “It takes awhile for governments to allocate these funds,” Fuller said. “I think what we’re seeing is the very early stages of some of that money moving through.”
But carriers are not benefiting from rising volumes
The flip side of OTVI is the Outbound Tender Reject Index, which measures freight tenders offered by shippers or brokers that are rejected as they make their way through routing guides. At its tightest, OTRI exceeded 28% on several days in late 2020 and early 2021. At its lowest, it sank to around 2.5% in May. More recently, it was standing at 3.5% to 3.6%.
The increase in OTVI while OTRI lingers at low levels, Fuller said, due to “the amount of capacity that was added during the COVID economy,” a figure he put at 25%. “That means you have a lot of excess capacity that we have to burn through. That needs to happen.”
And it is occuring, Fuller said, citing comments from industry executives who have seen companies enter bankruptcy. “But the problem is the market simply cannot correct fast enough to give anyone any sense of promise about the second half,” he added.
Fuller looked back on the weak freight market of 2019 that was highlighted by the collapse of New England Motor Freight in February 2019 and Celadon at the end of the year. He described those shutdowns as “bookends” to that freight market. And if history repeats itself, Fuller said, the closure of less-than-truckload carrier Yellow might be “the start of the great purge.”
The great inventory purge may be over
Strickland said the inventory situation that is impacting freight markets is one in which “we’re still adjusting to this world after COVID.” That period was marked by “this bubble where everybody went out and bought a bunch of stuff.” But that was followed by “this narrative about inventory reduction, Target and Walmart; they all had to get their inventories under control.” Data is showing that inventories have drawn at a rate faster than anytime since 2016, Strickland said.
Fuller said planning in the supply chain often goes out as much as a year, which means that beginning around May and June 2022, freight markets were signaling a significant downturn in demand. Inventories were “probably carried longer than retailers would have normally.” But if that planning signaled inventory purge starting in June 2022, “it means we’ve gone through a period of at least 12 months where they’ve liquidated inventories, and it’s quite possible that the market is now catching up to that reality.” That could be a factor in the rise in OTVI, Fuller and Strickland agreed.
Rates probably won’t go lower, but they’re not rising either
Trucking rates are measured in SONAR through several indices, but the National Truckload Index (Linehaul Only) is considered the most significant because it does not include fuel costs. The NTIL.USA, for the entire country, has risen and fallen between $1.50- and $1.75-per-mile rates in the past three months.
“I think what it is communicating is that there is a bottom in the market and rates will not go much lower,” Fuller said. Carriers have made a “rational decision that if they lower rates any further, they cannot survive. The market is communicating that this is the low end of the rate target.”
Contract rates are not falling as rapidly as might be expected, Fuller said. “And I think what’s happening is that a lot of carriers have rationalized that they don’t want to lower their rates in their RFP too much,” he said, even though as a result, freight is moving into the spot market. “I think the fear is that if they lock in low contract rates, they’re stuck with them.”
Fuller described the whole picture as “the most opaque market I’ve ever seen.”
Container rates unlikely to ever get back to pandemic levels
The Freightos Baltic Index for China to the North American west coast, FBXD.CNAW in SONAR, hit a peak in September 2021 at about 20,586. More recently, it has fallen to about 1,815.
Similar to how Fuller saw the current rise in OTVI linked to U.S. government infrastructure spending, that wild rise in ocean freight rates was also tied to COVID-related stimulus, he said.
But Fuller added that “nearshoring,” the gradual process to move manufacturing away from China and back to North America, is also playing a role in his conclusion that the global economy is not likely to ever return to those sorts of maritime rates. Short of a major military conflict, Fuller said, “I can’t see a scenario where our container rates get to the levels where it was during COVID.”
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