The Oreck Corp. filed for bankruptcy this week, after roughly five decades as a prominent force in the vacuum cleaner industry. The company cited rising competition for its current financial hardship, pointing to a steady decline in sales since 2010.
On Tuesday, Oreck Corp. issued a statement indicating the Chapter 11 protection would provide finance restructuring and asset consolidation, paving the way for the company to be sold. In wake of the bankruptcy filing, the Oreck family came forward to announce their intent to pursue purchase of the company.
David Oreck founded the business in 1963 and maintained control for the following four decades. In 2003, ownership was transferred to Oreck’s three children in a joint partnership with American Securities Capital Partners, a private investment firm.
Thomas Oreck, the founder’s son, served as CEO of the company from 1997 to 2007. He claims conflicting ideas about the business direction of Oreck Corp. prompted the investment firm, who maintained controlling shares of the company, to request his resignation.
In 2010, the vacuum company was purchased by Black Diamond Commercial Finance, an affiliate of Black Diamond Capital Management. By this time, Oreck Corp. was struggling and disagreements flared between shareholders and the company’s CEO Doug Cahill.
“I didn’t like the direction they were taking or how they were dealing with us, so I resigned,” explained Cahill, who left in March. “It’s hard to believe a 50-year-old company can be in this bad of shape in 50 days.”
The Oreck Corp. bankruptcy court documents reportedly indicate that the business is currently “in a precarious financial position.” According to William Norton, a lawyer representing Oreck Corp. in the filing process, the company “simply cannot generate cash fast enough to cover expenses as they arise.”
The Oreck family’s intention to buy back the company has been acknowledged by its current executives. However, legal requirements dictate that the family must participate in a bidding process as part of standard bankruptcy procedure.
According to Thomas Oreck, the family is “working diligently to negotiate a deal that would benefit the company.” He declined to disclose any financial details regarding the possible bid. If the bankruptcy process moves forward as expected, a deal could reportedly be reached in a matter of days.
Meanwhile, Oreck Corp. released an official statement indicating that the company’s day-to-day operations will not be affected by the proceedings:
“Oreck will continue to operate in the ordinary course of business while the sale process takes place, with authorized and exclusive dealers and other trade customers continuing to receive product for sale to ultimate consumers.”
The company currently employees more than 600 workers between its retail stores, manufacturing plant, and corporate offices. The Oreck Corp. has not announced if the bankruptcy filing will have any affect on its current workforce.