Southern Motion Seeks $6M in Chapter 11 Financing

Southern Motion Seeks $6M in Chapter 11 Financing


Debtor(s)	Southern Motion, Inc.
Court	U.S. Bankruptcy Court for the Northern District of Mississippi
Case Number	26-13155
Petition Date	August 31, 2026

Case Snapshot

The financing motion identifies the debtor, court, case number and petition date. This account reviews the initial financing proposal and objections using evidence available through September 10, 2026; it does not establish approval or funding of the requested facility. (Financing motion)

A $6 million facility with receivables-based availability

Southern Motion manufactures sofas, sectionals and recliners in Mississippi. In its financing motion, the company said operating revenue had fallen short of costs and that cash on hand could not cover both operations and Chapter 11 administrative expenses. It warned that a lack of financing would force an immediate wind-down, affecting approximately 645 employees. These were the debtor's projections in support of emergency relief. (Financing motion)

The requested financing is a recourse receivables-purchase arrangement. Porter would purchase eligible accounts at a 70% advance rate, subject to the agreement's eligibility requirements and the facility ceiling. The motion proposed liens on existing and future accounts receivable and real estate in Union County, Mississippi. Southern Motion represented that this collateral was otherwise unencumbered except for current property-tax liens on the real estate. (Financing motion)

Term	September 1 proposal
Maximum principal amount	$6 million
Anticipated use in first 30 days	No more than $5 million
Term	Six months
Advance rate	70% of eligible purchased accounts
Reserve percentage	30% of the unpaid balance of purchased accounts
Discount fee	0.85% each 30 days
Interest rate	Wall Street Journal prime rate plus 2 percentage points
Collateral	Accounts receivable and specified Union County real estate

Requested Financing Terms

These terms come from the motion's summary, which states that the financing documents govern if they conflict with the summary. The facility ceiling and anticipated initial use are neither reported draws nor cash balances. Availability depends on eligible receivables and the agreement's conditions. (Financing motion)

The Trustee challenges protections and disclosures

In a September 1 response, the U.S. Trustee questioned whether the debtor had supplied enough information to establish an arm's-length transaction with Porter and adequately demonstrated an inability to obtain other credit. The Trustee also challenged proposed waivers of the estate's right to surcharge collateral, provisions binding a successor trustee, and inconsistent default and notice provisions. (Trustee response)

The response identified a potential mismatch between the motion's fee description and the financing agreement, including a reference to $250,000 increments in the agreement. It also argued that the proposed $80,000 budget for creditors' committee attorneys was insufficient and that the provision for U.S. Trustee fees might not cover the amounts due. The Trustee asked that emergency financing relief be limited to what was needed to prevent immediate and irreparable harm pending a final hearing. These objections do not establish that the court rejected the financing. (Trustee response)

Rent arrears complicate the operating plan

The landlord's objection describes a December 2018 master lease and a November 2025 amendment granting rent concessions. According to the landlord, Southern Motion failed to make required payments, triggering a July 2, 2026 default notice demanding at least $6,217,528.58 in base rent, plus additional charges. The landlord said it subsequently pursued eviction proceedings in Lee and Pontotoc counties and that the resulting orders required Southern Motion to vacate by August 31. (Landlord objection)

Southern Motion's explanation emphasizes the cost and size of its leased footprint. Home News Now reported that chief restructuring officer David Baker's declaration described above-market rent for more premises than the company needed. The reported alternatives were to negotiate a resolution with the landlord or relocate on market terms. This describes the debtor's restructuring objective, not an agreed lease settlement. (Home News Now)

The landlord also opposed paying selected prepetition vendors before an unsecured creditors' committee could participate. It argued that Southern Motion had not adequately identified which suppliers were critical or established whether they would continue supplying goods without payment of old claims. A September 3 notice scheduled the critical-vendor hearing for September 10 at 10:30 a.m. in Aberdeen; the notice does not establish the hearing's outcome. (Landlord objection; Hearing notice)

The next material evidence is the court's disposition of the financing request and any agreement or ruling affecting the leased premises. Together, those documents would show what liquidity Southern Motion can actually access and on what terms it can continue manufacturing.