Armstrong update: Consequences loom if no buyer emerges

Note: The factories in China and Australia are not part of the bankruptcy.

Potential bidders?

Armstrong has said there are two potential bidders it is in talks with. A court filed by the lenders before the bankruptcy said the only expression of interest in certain assets is a non-binding letter of intent from a known liquidator.

Armstrong Flooring has set out in court documents its efforts to sell the company or enter into another agreement. On October 29, 2021, the company engaged investment bank Houlihan Lokey Capital to act as a financial advisor in connection with a sale process and evaluation of other strategic alternatives.

According to court documents, Armstrong Flooring wants to terminate all post-employment benefits, including life insurance and health insurance for retirees, but will continue to make the required payments until the case is decided, which is expected at the June 3 hearing. As of January 2021, there were 2,043 retirees receiving life insurance and 1,028 retirees, 563 spouses and 72 surviving spouses receiving health insurance, Armstrong said. Without a buyer, Armstrong said it would likely shut down operations. And even if there is a buyer, the new owner can cut jobs or even close the business and liquidate the assets.

Armstrong Flooring’s financial predicament worsened amid the start of the COVID-19 pandemic in 2020, after the company spent significant resources to implement a plan to modernize its operations and increase profits, according to a statement by Michel Vermette, President and CEO. The company has faced, among other things, prolonged closures of certain manufacturing facilities, supply chain disruptions, inflation and an overall decline in sales of flooring products, Vermette said.

In response, the company cut costs and began to see some improvement in 2021. However, earnings were still hampered by inflationary pressures and ongoing supply chain problems. Armstrong Flooring began negotiations with its lenders and eventually reached an agreement in December 2021 that significantly curtailed business activities, partially imposing what the president and CEO termed as a “heavy” cash rule arrangement, and requiring Armstrong Flooring to maintain certain levels of inventory and debtors.

Separately, on May 20, The New York Stock Exchange announced that it would immediately suspend trading of Armstrong Flooring’s common stock (ticker symbol: AFI). On May 9, the NYSE announced it would initiate proceedings to delist the company. Armstrong Flooring had the right to request a review of this decision by a committee of the Exchange’s board of directors until May 23. However, on May 20, Armstrong confirmed that it would not exercise that right. Accordingly, the NYSE has now suspended trading in common stock and said it will now file a delisting application with the Securities and Exchange Commission.

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