Harvey Electronics, Inc. announced today that it has filed a voluntary petition for Chapter 11 with the United States Bankruptcy Court for the Southern District of New York. Harvey will continue to operate its business and manage its property as a debtor-in-possession, and expects to promptly file a plan of reorganization. The company said in an announcement this afternoon that it hopes to emerge from court protection by the spring of 2008.
The company cited several factors for the move, including the distraction and expense related to unsuccessful merger negotiations with Myer-Emco, Inc., which cost Harvey more than $1.2 million. The merger talks broke off after financing became more difficult as credit markets tightened. The expense of the failed Myer-Emco transaction, plus the inability to raise new equity capital in the months immediately following the failed acquisition, triggered a delisting of its common stock from the NASDAQ Stock Market and created an event of default under the existing senior secured credit agreement.
"We regret that Harvey's best path to reorganization is through the courts, but despite the other distractions over the past year, our custom installation business remains strong," says Michael E. Recca, Harvey's Interim Chief Executive Officer at the time of today's filing, and Chief Restructuring Officer. "This step allows us to accelerate the transformation of our business from a specialty retailer with a home installation business to a home installation expert with appropriate retail distribution. While we will be closing and right-sizing some locations, we expect the majority of our stores will continue to play a critical role in our future operations. We offer some of the finest audio, video and home theater products from some of the most prestigious lines in the world. Most importantly, Harvey believes it has the finest team of sales consultants, design engineers, and field installation technicians in the business, and with their help we will continue to provide our customers superior audio and video entertainment solutions in the tri-state area."
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