đ„New Chapter 11 Bankruptcy Filing - Walker Edison Holdco LLCđ„
Shareholders leave term loan lenders holding a ready-to-assemble bag
Back on August 28, 2025, SLC-âburb-based Walker Edison Holdco LLC and three affiliates (collectively, the âdebtorsâ) filed chapter 11 sale cases in the District of Delaware (Judge Horan). The debtors operate their business in two âsegmentsâ: (i) they sell cheap âaffordable,â ready-to-assemble furniture exclusively online through Wayfair ($W), Amazon ($AMZN), Walmart ($WMT), Target ($TGT), Home Depot ($HD) and their company website, and (ii) they ⊠uh ⊠litigate with their former shareholders, đ.
To paint a fuller picture, letâs back up. After posting $13mm in EBITDA in â17, Prospect Hill acquired a ~55% majority share in the biz in September â18. Then, fueled in part by COVID and closed stores, sh*t really took off. By â20, EBITDA on the back of the debtorsâ IKEA-quality junk crested at $84mm.
Massive growth, so Prospect Hill and founders Brad Bonham and Matt Davis (collectively, the âformer shareholdersâ) looked for ways to capitalize GTFO while the getting was good.
But no one wanted to invest in these turds, at least on a non-debt basis ⊠which is a đ©đ©đ© if weâve ever seen one. At the time, every sh*tco was deSPACâing left and right.
In any event, with equity off the table, the former shareholders went with the next best option. Debt provided by so-called âsophisticatedâ lenders.
In March â21, the debtors entered into a $300mm term loan with bagholders Owl Rock Capital Corporation (n/k/a Blue Owl Capital Corporation ($OWL)), Pennant Park, Bain Capital Credit LP, and Evolution Credit Partners (collectively, âprepetition term lendersâ) and used $210mm of that to fund a special dividend to the former shareholders.
That ⊠led directly to the secondary business. Nowâs a good time to kick it to CFO and first day declarant Nate Brown for a breakdown:
â⊠[T]he lawsuits allege that beginning during the latter part of 2020, Walker Edison had experienced financial challenges related to: (i) inflationary cost pressures driven by dramatically elevated freight and shipping costs; and (ii) supply chain disruptions and challenges. I also understand that the lawsuits allege that at the time of the Special Dividend, and unbeknownst to the Prepetition Term Lenders at the close of the 2021 Term Loan Agreement, the Former Shareholders were aware of sufficient facts to know, among other things, that: (i) Walker Edison had substantial cash flow problems and problems meeting its EBITDA forecasts, would be unable to pay its suppliers on time, and were internally discussing slashes to hiring and other measures to address its liquidity shortage; (ii) the historical financial statements for Walker Edison overstated profitability by failing to properly account for incurred freight expenses that were rapidly increasing; (iii) Walker Edison would be unable to meet the financial covenants required under the Loan Agreement; and (iv) the financial projections used by Defendants to justify the $210 million Special Dividend were materially inflated and failed to account for the massive increase in expenses Walker Edison had experienced during the preceding months that were expected to persist for the foreseeable future.â
Hats off to the prepetition term lenders. We have no doubt their investment committee presentations looked like this âŠ
⊠even after potential equity holders had fled the scene.