Last week, Business of Home reported that beleaguered furniture brand Interior Define was going through a bankruptcy-like process and selling its assets to e-design platform Havenly. The story, which began with a wave of customer complaints last fall, has a lot of twists and turns. Here’s a quick explainer to break down the key points.
Why did Interior Define stop delivering furniture last year?
In 2022, the company hit a cash crunch and was unable to pay its vendors—including the Asian factories that make its furniture, and the logistics companies that deliver it to customers in the U.S. Some orders were never manufactured. Thousands of others made it across the water, only to end up stuck in the port system because Interior Define could not afford to have them released and delivered to customers.
How bad was it?
According to our reporting, toward the end of 2022, the company was only days away from complete insolvency.
Why was communication with customers so bad?
This can be traced to a variety of factors. The company underwent several rounds of layoffs in 2022, and as a result, its customer service teams were understaffed. However, the larger problem was simply that Interior Define was unwilling to tell customers directly that cash flow issues were holding up delivery. According to several former employees, management instructed sales representatives to offer up explanations that were technically true—“supply chain disruption”—but did not paint the full picture of the company’s troubles.
Did Interior Define go bankrupt?
Not exactly. The company has entered into a similar legal process called “assignment for the benefit of creditors,” also known as an “ABC.” As part of the ABC, Interior Define as a legal entity will be dissolved and its remaining assets will be liquidated. Whatever money is generated will largely go to pay its “secured creditors” (banks and investors) first.
Why is Interior Define’s site still up and running?
Prior to entering into the ABC process, Interior Define sold its intellectual property (the brand name, copyrights and designs) along with its social channels and website to Havenly. Going forward, Havenly will be running Interior Define as a more-or-less identical brand. Under the hood, however, it will be a new legal entity, free of the original Interior Define’s debts and obligations.
It’s complicated, but this is actually a common practice when troubled businesses are sold. The buyer wants to take over the company but can’t afford to pay all the debts that have stacked up. In order to make the deal work, the distressed business goes through a legal process like bankruptcy or an ABC to shed itself of liabilities. In this case, it means that Havenly has bought Interior Define as a brand but is not legally obligated to pay its debts or satisfy orders placed in 2022.
Will long-delayed orders be delivered?
According to a source with knowledge of the situation, Havenly has negotiated with Interior Define’s vendors to pay some of the company’s debts and release the thousands of orders that have been sitting at U.S. ports. The same source has told BOH that “the vast majority” of such orders will be delivered to clients in the near future. Orders that were never manufactured are less likely to be fulfilled. Havenly has already been sending emails to some Interior Define customers and is planning to unveil a website that will allow others to check the status of their orders.
Why would Havenly pay to deliver sofas when it’s not legally required to do so?
Though the company has not publicly commented on the acquisition, presumably Havenly wants to start off Interior Define’s next chapter on the right foot and to turn the narrative around on a company that has built up no small amount of ill will.
Will customers get refunds from Havenly on their orders from 2022?
No. Refunds will be processed through the trust that has been tasked with liquidating the original Interior Define’s assets. Given that the process will likely favor banks, investors, vendors and employees over individual customers, those who want a refund will likely have better luck pursuing the issue (hastily) through their bank or credit card provider.
What is Affirm’s role in all of this?
Many Interior Define customers purchased product through the buy-now-pay-later provider. Several have complained on social media that Affirm continues to deduct money from their bank accounts, even as orders remain in limbo. Recently, Affirm told several news outlets: “While we typically have a 60-day window for disputes, customers who have issues with an outstanding loan for Interior Define should contact Affirm through our Help Center to initiate a dispute. Once a dispute is initiated, all payments will be paused.”
Will there be lawsuits?
It’s hard to say. But as part of the ABC process, the original Interior Define will be dissolved as a legal entity and all of its assets will be liquidated. Those two facts will likely discourage potential litigation—but not necessarily rule it out.
What happened to Interior Define’s staff?
The company underwent several rounds of layoffs in 2022, reducing it from about 300 employees to roughly 115. As part of the ABC process, CEO Antonio Nieves has resigned.
Will Interior Define stores reopen?
According to a source with knowledge of the situation, the company’s retail fleet of 20 stores will definitely shrink. However, it’s possible that some locations will reopen.
Homepage image: Courtesy of Interior Define