American Freight Appliances and Furniture closing all stores in Indianapolis

The owner of American Freight Appliances and Furniture, which operates four stores in Indianapolis, has agreed to close all stores in the nationwide retail chain as part of a Chapter 11 bankruptcy agreement.

Franchise Group Inc. plans to close more than 350 American Freight stores in 40 states, according to the deal reached with lenders over the weekend, according to court documents. The chain, which has about 3,000 employees, was expected to begin store-closing sales immediately.

In Indianapolis, American Freight operates stores at 8920 Corporation Drive on the city’s northeast side, at 5615 38th St. on the west side, at 5750 Kopetsky Drive on the south side and at 6022 Crawfordsville Road in Speedway.

The chain also has Indiana stores in Muncie, Lafayette, Bloomington, Terre Haute, Madison, Fort Wayne, New Albany, Clarksville, Mishawaka, Evansville and Portage, according to its website. The stores are typically located in warehouses.

American Freight was founded in Lima, Ohio, in 1994. The company was acquired in 2020 by Franchise Group and combined it with former Sears Surplus and Sears Outlet stores under the American Freight name.

Franchise Group, which also owns brands including the Vitamin Shoppe, Buddy’s Home Furnishings and Pet Supplies Plus, filed for bankruptcy protection after months of losses and turmoil surrounding its backer B. Riley Financial Inc.

The company, also known as FRG, filed under Chapter 11 in Delaware, listing almost $2 billion of debt, according to court documents.

“Today’s announcement to de-lever our balance sheet is a pivotal step forward in enabling our market-leading businesses Pet Supplies Plus, The Vitamin Shoppe, and Buddy’s Home Furnishings to realize their full potential,” said Andrew Laurence, FRG’s president and CEO, in a written statement released Monday. “Each of these businesses has a demonstrated value proposition and provides great products and services to customers, which they will continue to do seamlessly during this process. Strengthening FRG’s balance sheet will allow us to enhance our support for these businesses as they advance their growth trajectories.”

Bloomberg News, citing people with knowledge of the matter, reported late Saturday that FRG was preparing to hand control to lenders including HPS Investment Partners after months of negotiations with the group over a restructuring.

FRG said in a statement it has struck a deal with lenders that own most of its senior debt. Under the proposal, supporting lenders have agreed to swap out first lien debt for 100% of the equity in the reorganized business.

The company has been at the center of turmoil surrounding Los Angeles-based B. Riley, the investment and brokerage firm that helped arrange a $2.8 billion buyout of the company last year. The buyout was led by founder and then-CEO Brian Kahn.

Just months after FRG’s debt-fueled buyout by Kahn, the founder stepped down from his CEO position amid a criminal investigation into his role in a securities fraud case tied to the collapse of defunct hedge fund Prophecy Asset Management. Trouble at FRG accelerated as its brands struggled to perform as projected, compounded by maturities on its debt.

The group sold its Sylvan Learning business in February but other possible disposals were hampered by the allegations involving Kahn, FRG’s chief restructuring officer David Orlofsky said in a court filing. That meant “Franchise Group could not deleverage its balance sheet.”

FRG said Sunday that the first lien lender group also agreed to provide the company with $250 million in Chapter 11 financing. The financing, along with cash it already has on hand, will provide the business “with ample liquidity to maintain operations across its businesses and fulfill go-forward commitments to employees, customers, vendors, franchise partners, and other stakeholders,” according to the statement.

The company will still market its business in Chapter 11 to ensure its assets are sold for as much as possible. As part of the restructuring, FRG said decided to close discount retailer American Freight.