Stock Building Supply’s Ch. 11 bankruptcy protection filing was a picture of what many in its sector have gone through since the housing market has fallen from its peak nearly four years ago.
Stock Building Supply’s filing in support of bankruptcy protection outlines UK-based Wolseley’s decision to exit the struggling Raleigh, NC-based building materials distributor. In its fiscal year ended July 31, 2008, Stock recorded a $744 million loss. It had $3.5 billion in sales. The distributor filed for Ch. 11 bankruptcy protection May 6, 2009.
James Major, vice president, finance and strategic planning, wrote that single-family housing starts had dropped by more than 80 percent since their peak in 2005. In addition, declining lumber and panel prices, as well as remodeling sales, have had a significant impact on Stock’s sales. As the distributor’s chairman of the board, John Whybrow, said in March, Enough is enough. We cannot go on with markets deteriorating like that.
While one of the largest, Wolseley is certainly not the only player hit hard by the years-long decline in the residential housing market. Another distributor in the construction supply arena, ORCO Construction Supply, Livermore, CA, also filed for bankruptcy protection recently – and just announced its sale to HD Supply White Cap, based in Costa Mesa, CA. There have been others and will likely be more to come.
For its part, Stock, which was formed form Wolseley’s acquisition of Carolina Builders in 1986 and built up through acquisitions, has initiated several restructuring efforts in an attempt to avoid the need for outside capital. (Wolseley recently announced private equity firm The Gores Group would take majority ownership of the distributor in a joint venture agreement between the two.)
In 2006, Stock Building Supply started reversing overcapacity by closing branches and instituting the first of many workforce reductions. In October 2008, the distributor continued reducing headcount – this time by nearly 5,000 positions to the current levels of 7,000. At this time, Stock also closed more than 90 branches, including exits from 16 markets across the country. This brought total branch closures to more than 150 since October 2006, and headcount reductions to more than 11,000 positions since headcount peaked in June 2006.
As part of its filing, Stock Building Supply will slash an additional 2,220 jobs and close more locations. The distributor will reject 210 leases where the company has already ceased or plans to cease operations. That number could grow.
The company reported in its filing that it will retain 5,000 jobs, down from 7,220 who are currently employed.
“Without the restructuring and relief provided by the Plan and the additional investments into the business, Stock likely faces a liquidation, which would result in the closing of additional locations, the loss of additional jobs, and the impairment of additional classes of creditors,” Major wrote in the court filing.
Wolseley started looking for a way to dispose of Stock in early March 2009. The company knew that Stock would have to be restructured further as a result of any transaction, according to the bankruptcy filing. In the end, Wolseley received “over five bids” for the business.
As previously reported, Gores Holdings, which won that bidding process, will be investing $75 million in Stock, and providing a revolving line of credit of up to $125 million after completion of the bankruptcy process. Wolseley preferred a joint venture partner for the Stock business. It will retain a 49 percent stake.
Founded in 1987, The Gores Group, LLC is a private equity firm focused on acquiring controlling interests in mature and growing businesses. The firm’s current private equity fund has committed equity capital of $1.7 billion. Headquartered in Los Angeles, CA, The Gores Group, LLC maintains offices in Boulder, CO, and London.
Stock: A Casualty of the Housing Crisis
Stock Building Supply's filing in support of bankruptcy protection outlines UK-based Wolseley's decision to exit the struggling Raleigh, NC-based building materials distributor. In its fiscal year ended July 31, 2008, Stock recorded a $744 million loss. It had $3.5 billion in sales. The distributor filed for Ch. 11 bankruptcy protection May 6, 2009.
James Major, vice president, finance and strategic planning, wrote that single-family housing starts had dropped by more than 80 percent since their peak in 2005. In addition, declining lumber and panel ...
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