Handy Hardware Files for Bankruptcy to Save its Retail Business
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Handy Hardware Files for Bankruptcy to Save its Retail Business

January 18, 2013

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Handy Hardware Wholesale Inc., an independent hardware retailer based in Houston, Texas, has reportedly filed for Chapter 11 bankruptcy, according to a report from Fox Business.

Sources say the company, which was created by several individual retailers, struggled to pay for the construction of its second distribution center, which was launched during the heart of the recession in 2009.

Three years ago, Handy Hardware constructed a warehouse in Meridian, Mississippi, that featured 460,000 square-feet of storage space, according to sources.

This proved to be a poorly timed decision, as the construction dramatically increased the company’s expenses at the same time Handy Hardware was experiencing a significant decrease in business due to the lagging economy.

In 2011, for example, the company lost $8.4 million, according to documents Handy Hardware filed in the U.S. Bankruptcy Court in Wilmington, Delaware, where the company is incorporated.

The hardware company is based in Houston, but its decision to incorporate in Delaware reflects the modern reality that most corporations are founded in Delaware in order to take advantage of the state’s friendly financial laws.

Sources say Handy Hardware owes nearly $15 million to its largest secured creditor, Wells Fargo & Co., which has reportedly agreed to extend $30 million in extra financing to the company during its bankruptcy.

The bank’s optimism about the hardware company’s ability to repay its new debt is likely a result of the fact that Handy Hardware still has roughly $38 million worth of inventory in its warehouses, according to sources.

So Handy Hardware is looking to take advantage of bankruptcy’s automatic stay, but by no means is it waving the white flag. According to a press release, the company is simply looking to shrink its operations to the “right size” and reduce its overall debt.

Thus, the future looks relatively bright for the company that was founded in 1961 by a consortium of hardware stores looking to reduce the costs of keeping small inventories.

As of today, the company consists of 1,000 members, representing roughly 1,300 stores, including hardware stores, home centers, and lumber yards. Sources say Handy Hardware itself employees 303 people.


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