Empire Today: Floored by the Market

Welcome to the 176th Pari Passu Newsletter,

In today’s edition, we’re covering Empire Today, the largest shop-at-home flooring company in the United States, and one of the most recognizable brands in home improvement. The company, known for its iconic “800-588-2300 Empire!” jingle, was acquired by Charlesbank Capital Partners in August 2021 for approximately $1bn at the peak of the post-COVID home improvement boom. However, as the home improvement market normalized, Empire found itself in a tough liquidity position. 

In November 2024, Empire Today executed a liability management exercise that included the dropdown of Brand IP, a new money raise, and a tiered debt exchange. While the transaction was well-structured and successful in extending near-term runway, Empire retained financial advisors once again, on February 12, 2026, just 15 months later.

In this writeup, we’ll walk through Empire Today’s shop-at-home business model and 67-year corporate history, before detailing the COVID-era tailwinds that underpinned the Charlesbank buyout and the rapid reversal that followed. We’ll then break down the mechanics of the November 2024 LME, including our estimates of the exact exchange economics. Finally, we’ll analyze the company’s post-LME deterioration and explore potential outcomes for a second restructuring. 

Empire Today is the largest direct-to-consumer, shop-at-home flooring company in the United States. The company operates across 70+ major metropolitan areas, serving both residential and commercial customers [1].

Empire Today’s value proposition relies on its shop-at-home model, which emphasizes convenience and speed. Rather than requiring customers to visit retail showrooms, Empire sends consultants directly to homes and businesses with mobile showrooms containing hundreds of flooring samples. Customers can view products under their actual lighting conditions and receive on-site measurements and quotes before scheduling installation. For in-stock flooring, installation is often available the next day. This “quote-to-live-floor” cycle of approximately 48 hours is a meaningful differentiator against competitors [1]. 

The company generates revenue from the bundled sale of flooring products and installation services. Rather than producing its own flooring, Empire purchases inventory from suppliers and stores it in regional warehouses, reducing capital intensity and allowing the business to better flex capacity with demand [1]. While no official product mix is disclosed, industry estimates suggest carpet is the largest revenue contributor, although vinyl plank has been a faster-growing category in recent years. 

The business serves two primary customer types. The first is through the residential DTC channel, and represents the core of the business. Residential flooring demand is cyclical and is driven by three primary factors: new home construction, existing home sales (which trigger renovations), and remodel activity in occupied homes. The second business line is the commercial segment, branded as “Empire for Business,” which targets multi-unit housing businesses and property managers. Commercial demand tends to be less sensitive to macroeconomic conditions, as landlords must routinely update units to remain competitive. 

Empire Today competes with both national big-box retailers, such as Floor & Decor, Home Depot, and Lowe’s, and independent contractors, and its unique value proposition sets it apart from both. First, big-box retailers offer flooring and installation services, but typically rely on in-store selection and third-party installation, creating a less convenient and cohesive customer experience [1]. On the opposite end, smaller independent contractors offer personalized services, but lack the speed, brand recognition, and supplier relationships of Empire Today. 

More broadly, the flooring industry has faced significant headwinds since 2022. Sustained inflation and elevated mortgage rates have reduced existing home sales, as homeowners with low mortgage rates remain locked in place, rather than selling and buying new homes at higher rates. The magnitude of this decline is difficult to overstate. In 2022, the U.S. Pending Home Sales Index fell sharply from its 2021 peak to levels below even the depth of the 2008 financial crisis. Importantly, flooring, especially as part of an owner remodel, is viewed as very discretionary spending, as many consumers will simply defer spending money on flooring amidst tough macro conditions. As we’ll detail later, this dynamic has been especially challenging for Empire Today, which relies on remodeling activity from both home sales and occupied renovations. 

Now that we’ve broadly overviewed Empire Today’s business model, let’s move to the 67-year-old company’s corporate history. 

Empire Today traces its origins back to 1959, when Seymour Cohen founded Empire Plastic Covers as a small, family-owned business operating out of Chicago. The company initially sold plastic furniture covers, which were popular at the time. Quickly, Cohen recognized the opportunity to expand into flooring and rebranded as Empire Home Services, adding carpet to its product offerings. Throughout the 60s and 70s, the company remained a regional Chicago-area flooring provider, building a reputation for in-home sales and installation services. In 1977, the company developed its iconic jingle, “800-588-2300 Empire!”, later revised to end with “Empire Today.” This tune would become one of the most recognized advertising tunes in America. 

Empire remained a family-owned business for more than four decades until 1999, when it was acquired by Mercury Capital [2]. Under Mercury’s ownership, the company accelerated its national expansion and underwent a rebranding, adopting its current name, “Empire Today,” in December 2002. The new name reflected the company’s same-day consultation and next-day installation abilities.  

In January 2012, Empire acquired its longtime Chicago rival, Luna Carpet, for an undisclosed amount. Luna Carpet, founded in Chicago as a plastic covering company before expanding into carpet, had a nearly identical origin story to Empire’s. The acquisition brought together two of Chicago’s most recognized flooring brands. 

In November 2016, after 17 years of Mercury ownership, H.I.G. Capital, a Miami-based PE firm, acquired Empire from Mercury. While the financial terms of the deal were not disclosed, the company was reportedly generating approximately $50mm in EBITDA at the time, implying a purchase price in the mid-hundreds of millions. At the time of the acquisition, Empire already operated in 68 metropolitan markets, including the 30 largest in the United States, and had served over a million customers [3]. H.I.G. expressed intentions to expand Empire’s geographic footprint and invested in strategic initiatives throughout its ownership period, including the addition of “store-within-a-store” locations inside JCPenney retail stores. 

In August 2021, H.I.G. announced the sale of its majority stake to Charlesbank Capital Partners, a Boston and New York-based PE firm. H.I.G. retained a minority stake and board seat, signaling confidence in the company’s continued growth [4]. Sources indicated that the deal valued Empire Today at approximately $1bn, and that at the time of the deal, the company was generating ~$100mm in EBITDA, implying an approximate 10x purchase multiple. Charlesbank funded the deal with a $595mm TLB, priced at S + 5.00% and maturing in March 2028. $595mm of debt implies an LTV of 59.5% and entry leverage of ~6x, given an estimated $100mm of LTM EBITDA. 

Under Charlesbank’s ownership, Empire looked to strengthen its commercial flooring capabilities. In February 2022, the company acquired Sitton Contract Flooring, a multi-family flooring provider based in California. The acquisition helped bolster the company’s “Empire for Business” division and provided valuable exposure to the multi-family market. While the purchase price wasn’t disclosed, sources indicated the transaction added ~$20mm in revenue, a relatively small deal, making up ~2.5% of Empire’s Revenue at the time. 

At the time of the Charlesbank buyout, the deal appeared perfectly timed. The COVID-19 pandemic produced multiple tailwinds that directly benefited Empire. The first was an unprecedented spike in home improvements. As American consumers were forced to stay at home, spending that would have been purposed for vacations or other discretionary purchases was directed towards improving living spaces. The residential flooring market was a direct beneficiary of this. Secondly, as mortgage rates reached unprecedented lows, home sales spiked, driving further home improvements.

Empire’s financials reflected this favorable environment. Revenue climbed from an estimated $740mm in 2019 to $860mm in 2021, a 16% increase. More importantly, over the same period, we estimate that adj. EBITDA increased from $60mm to $100mm, a 67% increase. This outsized EBITDA growth is likely attributable to two factors. The first is operating leverage, spreading Empire’s fixed costs (warehousing, overhead, etc.) across more sales. The second is reduced ad spend due to very strong demand in the flooring industry. 

While it was clear this demand wouldn’t last forever, it normalized much quicker than anticipated, as in March 2022, the Fed launched an aggressive series of rate hikes to combat post-pandemic inflation, eventually pushing the fed funds rate to its highest level in over two decades. Mortgage rates, which had hovered around 3% during the pandemic, surged to 7% by late 2022 and remained elevated. As a result, fewer homeowners were willing to sell and give up their low mortgage rates, creating the “lock-in” effect. Additionally, post-COVID inflation finally took its toll on consumer spending, and American consumers began deferring discretionary purchases as the cost of essential goods rose. 

As the flooring and broader home improvement market stagnated, 2023 revenue declined roughly 2% to an estimated $860mm. However, sources indicated that adj. EBITDA fell much harder, from approximately $100mm to $60mm. As revenue declined, Empire was forced to spend more on advertising just to maintain its market share. Advertising spend jumped from 10% of revenue in 2022 ($88mm / $880mm) to 14% in 2023 ($120mm / $860mm), an increase of approximately $32mm, which nearly matches the company’s ~$35mm decrease in EBITDA over the same period [6]. In a declining market, this ad spend represented throwing good money after the bad, as it cost more and more to acquire new customers who were going to be more price sensitive. 

By June 2024, Empire Today found itself in a tough financial position. LTM revenue fell to just $820mm, as consumers continued to defer discretionary home improvement spending [6]. At the same time, Empire’s leverage rose to 13.6x, implying approximately $45mm of LTM adjusted EBITDA. 

Beyond its effect on home sales, the Fed’s rate-hiking campaign also perpetuated Empire Today’s debt burden. On Empire’s $595mm TLB, which was priced at S + 5.00%, interest expense hovered around $30mm post-LBO, when rates were near zero. However, by 2024, SOFR had risen above 5.00%, more than doubling LTM cash interest to $60mm+, a massive 133% of adjusted EBITDA. 

Empire’s operational issues, combined with an unsustainable capital structure, put the company in a tough liquidity position by June 2024. Over the previous 12 months, Empire had burned $30mm of cash, and as of June 2024, it had drawn $23mm of its $60mm revolver and had less than $1mm of cash on hand. At face value, given an annualized cash burn rate of $30mm, it appeared that Empire still had well over a year of cash runway. However, Empire’s RCF credit agreement included a springing covenant that capped RCF availability at 40% of the committed $60mm ($24mm) [7]. Given leverage was at 13.6x in June 2024, Empire had certainly triggered this covenant, meaning its true liquidity was likely under $2mm, as it had already drawn $23mm of its $24mm RCF cap and had less than $1mm of cash on hand. 

The table below details our complete estimates for Empire’s financials over this period. As a reminder, our assumptions are in italics.

Debt markets took notice of Empire’s liquidity issues, as the company’s first lien TLB traded in the mid 70s during July 2024, and fell to the low 60s by September 2024, a deeply distressed level for first lien debt. With ~$600mm of 1L debt and little RCF claims sitting in front of it, these debt prices implied an enterprise value of roughly $375-$425mm, a stark decline from the $1bn valuation Charlesbank had paid just three years earlier. 

As Empire Today navigated its liquidity crisis, it was reported in September 2024 that the company retained Greenhill to explore a comprehensive solution to its capital structure [8]. By this time, Empire’s LTM EBITDA had continued to fall to $29mm [13]. Given the fact that we estimated under $2mm in liquidity as of June, it is inferable that between June and September, Empire and its advisors had negotiated some form of covenant relief, or another measure to extend the runway. 

By November 2024, it was reported that Empire approached third-party lenders for a potential new money raise to address its liquidity issues [8]. At the same time, the company and its advisors were working with existing lenders on similar deals. As a reminder, it's common for companies in need of liquidity to run a dual-track process, in which they approach both existing lenders and third parties. The threat of a so-called “deal away”, where companies raise priming new money from third-party lenders, subordinating existing debt, often helps companies secure better terms for an LME, as both lender groups must provide competitive proposals. 

In Empire Today’s case, a group of existing lenders, holding 82% of the term loan, along with 100% of the RCF, provided the winning proposal, announced on November 18, 2024. Empire Today’s LME involved a dropdown of IP, new money raise, existing debt exchange, and maturity extension. It unfolded via the steps below [8]. 

First, Empire Today created a new unrestricted subsidiary, Empire Today IP LLC. As a reminder, an unrestricted subsidiary (UnSub) is not subject to the overarching credit agreement and can freely raise new debt. The company transferred an undisclosed amount of IP to the UnSub, thereby structurally subordinating any holdouts to the LME. If Non-AHG existing lenders declined to participate, they would be second in line to any recoveries stemming from IP collateral at the UnSub level. 

Next, Empire Today raised a $100mm new money term loan, offered to all existing TLB lenders, and backstopped by the AHG, raised at the UnSub level. The new money comprised tranche A of the new first-out term loan. This $100mm of new money was then upstreamed back to the operating company, and used to pay down the company’s RCF, pay transaction expenses, and provide near-term liquidity relief. Notably, while the new money was upstreamed via an intercompany loan, there were no indications of any guarantees from the restricted group or other company entities, meaning new money lenders likely did not receive double-dip protections, but only the structural benefit of the UnSub. 

Additionally, the company’s RCF, previously set to mature in October 2025, was extended to February 2029, and presumably exchanged into an RCF housed at the UnSub. The revolver’s springing leverage covenant was also adjusted to trigger at 21.6x, beginning in 2027, providing more breathing room to adj. EBITDA, as Empire Today attempts to use its new liquidity to weather market downturns [13]. The 21.6x threshold was calculated on total debt at close of ~$634mm / $29mm of EBITDA, effectively setting the covenant at Empire’s leverage level at the time of the transaction. For context, springing covenants typically trigger in the 6-8x range. Setting one at 21.6x is effectively an acknowledgement that the company would still be in technical default under any conventional standard. 

Lastly, an exchange was offered to holders of the $595mm term loan, allowing lenders to exchange into a mix of the $108mm tranche B 1O TL and $426mm 2O term loan. All tranches of the new TL were extended by 17 months to mature in August 2029. These new tranche sizes, along with market commentary, imply a blended 9% discount to par in the exchange of the existing term loan. 

While group-specific exchange terms were not disclosed, we’ll provide an accurate estimate based on the information available, along with context from the 2024 LME market. To start, given a 9% blended discount and $534mm of post-exchange debt, we estimate approximately $587mm in TLB principal outstanding prior to the LME. The AHG, holding 82%, accounted for $481mm while the Non-AHG accounted for $106mm. 

The biggest assumption we’ll make is an 11-point exchange gap between the AHG and Non-AHG. This is broadly consistent with most 2024 LMEs, which typically offered Non-AHG participating lenders a 10 to 15-point discount to the AHG’s exchange. While these discounts are material, it's critical to remember that the alternative is to be structurally subordinated to every lender that does an exchange, which, in this case, already includes the AHG, which holds 82% of the debt. 

Typically, 2024 LMEs within this discount range gathered notably high rates of participation. Some examples include City Brewing (April 2024), which featured a 12-point discount and 98% participation, and Quest Software (May 2024), which featured a 15-point discount and gathered 100% participation. 

Applying an 11-point gap to the existing exchange terms yields an estimated 93-cent and 82-cent exchange for AHG and Non-AHG debt, respectively. Given the fact that the AHG holds 82% of the TLB, these discounts align with the reported blended discount of 91 cents. In terms of tranche allocations, we’ll assume that all Non-AHG lenders were forced to exchange into the 2O tranche, while a portion of the AHG debt (24%, or $108mm) exchanged into the 1O tranche B. Notably, the transaction achieved near-universal support, with less than 1% not participating, so for simplicity’s sake, we won’t tie an amount to holdout debt in our exchange picture. This near-universal support also validates our 11-point discount assumption, as a wider differential would likely have driven more lenders to hold out or pursue litigation. 

Summary terms and a complete picture of this exchange are detailed below:

Empire Today’s November 2024 LME achieved its immediate objective of buying time. The transaction extended debt maturities out to nearly five years following the transaction, but more importantly, it provided $100mm of new money financing. If we assume $10mm in transaction-related fees, $90mm in new liquidity, comprised of $67mm in cash and $23mm in revolver repayment, equates to three years of cash runway at the company’s current $30mm burn rate. Additionally, the adjustment to the springing leverage covenant provided even more room to pursue a turnaround without the threat of a technical default, bringing total post-transaction liquidity to approximately $128mm. 

While the LME extended maturities and provided near-term liquidity relief, Empire Today remained highly leveraged, at approximately 14.1x following the transaction. Even as rates began to decline in late 2024, Empire Today would still need to execute a substantial operational turnaround to service its now-larger debt burden. With $634mm of post-transaction debt, bringing leverage to a manageable 6x would require EBITDA to exceed $100mm, a level seen only during the post-COVID home renovation boom. 

Over the months following the LME, this turnaround failed to materialize, as the housing market continued to struggle with the same headwinds. Throughout 2025, mortgage rates remained above 6%, as home prices reached record highs and home sales hit 30-year lows [9]. Notably, the LME was likely predicated on the assumption that 2022’s sharp drop in home sales would reverse, or at least begin to normalize in 2025, but instead, home sales remained persistently weak, turning what many thought was a temporary slowdown into a prolonged market downturn.  More broadly, consumers continued to pull back on big-ticket spending, as overall home improvement spending softened for a third year in a row [10]. Moreover, American consumers increasingly prioritized “need-to-have” home improvements over “want-to-have” upgrades, as spending on repairs and upkeep outpaced spending on furnishing and cosmetic upgrades. In summary, the real estate headwinds that emerged in 2022 never meaningfully reversed and, by many measures, worsened in 2025, exposing Empire to a continued period of distress.

The effect of these continued demand struggles on Empire Today’s financials was severe. Most notably, in H1 2025, Empire Today had already burned through $45mm, representing an annualized burn rate of $90mm. If it continues, Empire will likely burn through all of its post-transaction liquidity by early 2026. While specific EBITDA figures haven’t been disclosed, we can back into an estimate using reported cash burn. With an estimated $60mm in annual interest expense and $10mm in capex and working capital needs, $45mm of cash burn in H1 2025 implies Empire generated approximately ($10mm) of EBITDA over the same period. Annualized, this suggests full-year EBITDA of ($20mm), a $65mm decline from pre-LME June 2024 levels. While this represents a severe decline, given the details above and the effects of operating leverage and continued ad spend, this decline is certainly possible.

Following the LME, Empire Today’s debt prices immediately reflected the fact that no operational changes had been made. While the $200mm of 1O debt traded at par, the $426mm traded in the mid-50s, implying roughly $400mm in enterprise value, also consistent with pre-LME implied valuation. For the AHG, the transaction still made economic sense, as roughly a quarter of their claims elevated to the 1O tranche now traded at par, while the remainder only fell from the low 60s to mid 50s.   However, as Empire’s continued distress was revealed to the market, prices continued to drop. By the end of 2025, Empire’s 1O debt traded in the high 40s, down 50%+ from post-LME levels, while 2O debt was near zero, implying continued value destruction, consistent with our EBITDA estimate above. Notably, 1O debt prices now imply roughly $100mm in enterprise value, a quarter of what the market indicated following the LME. 

If Empire had burned $90mm of cash in 2025, it would have entered 2026 with approximately $30mm of remaining liquidity, as immediately following the transaction, we estimated ~$120mm in total liquidity. While the adjusted 21.6x springing leverage covenant does not take effect until 2027, Empire’s liquidity position is still severely troubled. Having entered 2026 with an estimated $30mm in liquidity, the company likely has only weeks of runway as of late February 2026, assuming sustained aggressive cash burn rates.  

As Empire Today finds itself in another precarious liquidity situation, it announced on February 12, 2026, that it had once again retained Greenhill, while top lenders, including Fortress and Invesco, retained Paul Hastings [11]. While the 2024 LME bought time, it did not address the fundamental mismatch between Empire’s earnings and debt load. It’s very likely that this time the company needs a more comprehensive capital structure solution. To assess what a post-restructuring capital structure might look like, we can work backward from normalized cash flow generation. 

Based on our estimates of Empire’s 2025 financial performance, the company likely generated negative EBITDA and thus negative UFCF, given its reported aggressive cash burn rate. However, for restructuring purposes, the relevant question is what UFCF the business could generate in a normalized environment with a right-sized cost structure. Even in distress, Empire retains its nationally recognized brand and an extensive geographic footprint. We estimate that a restructured Empire Today, with reduced ad spend and a slimmer fixed-cost structure, could easily generate $40mm of EBITDA, even in a market downturn. While this represents a 60% decline from the $100mm+ peak reached during COVID, it would be broadly consistent with the company’s pre-pandemic earnings. Subtracting out Empire’s normal capex and working capital needs of $10mm implies a normalized UFCF of $30mm. 

The next step is determining how much interest expenses the business can sustain while still generating positive levered free cash flow. A company emerging from a restructuring with negative or breakeven LFCF would simply be delaying the inevitable, as we saw with the 2024 LME. Assuming the goal is a modest positive LFCF of $10-15mm, Empire can reasonably sustain an annual interest expense of $15-20mm, roughly a third of what the company has paid over the past few years. 

From there, we can back into a potential post-restructuring capital structure. Assuming a blended cost of debt of 10-12%, which is broadly consistent with post-reorg take-back debt costs, Empire can sustain approximately $150-200mm of total debt. Notably, this represents a dramatic reduction from the current $634mm outstanding. 

For Empire Today’s debt to be reduced from $634mm+ to $150-200mm, the most efficient outcome would be a consensual out-of-court equitization, where 1O lenders receive take-back debt, sized to the company’s sustainable debt capacity, and some equity, and 2O lenders fully convert to reorganized equity. As a reminder, the 2O TL currently trades below 5 cents, as the market effectively implies this outcome. In this scenario, if the $208mm 1O term loan were exchanged into $150-$200mm of takeback debt, it would recover between 72 and 96 cents. To the extent that the take-back debt does not cover the full face value of the 1O claims, the remaining portion would convert into reorganized equity.

When considering this outcome, another interesting dynamic is the shift in value towards the AHG, stemming from the 2024 LME. As a reminder, we estimated that the $108mm Tranche B 1O TL consisted entirely of AHG claims, representing 22 cents of the 93 cents received on their $481mm in original TLB claims held by the AHG. We estimated that the remaining 71 cents exchanged into the 2O tranche, alongside Non-AHG lenders who received 82 cents entirely in 2O debt. While our estimated 11-point gap between AHG and Non-AHG members was meaningful, it wasn’t extraordinary. The real value transfer came from the tranche allocation. By securing the right to exchange nearly a quarter of their claims into the 1O tranche, AHG lenders put themselves in a position to hold the vast majority of takeback debt if such an exchange were to occur. 

To illustrate this, assume Empire Today pursues an out-of-court restructuring, targeting a new capital structure with $200mm in debt, a 96-cent recovery through takeback debt for 1O lenders. Consider two hypothetical lenders, an AHG and a Non-AHG lender, who each held $10mm of Empire’s original TLB prior to the LME. Assuming each lender funded their pro rata share of the LME’s new money, each lender would hold $11.7mm of debt following the LME ($10mm + $1.7mm new money funded). However, $3.9mm (33%) of the AHG lender’s debt investment is now 1O ($2.2mm existing + $1.7mm new money). Of the Non-AHG lender’s $11.7mm investment, only $1.7mm (15%) is 1O. 

Following our hypothetical out-of-court restructuring, the Non-AHG lender would be left significantly more impaired. Assuming a 96-cent discounted exchange of 1O debt, the AHG lender would hold $3.7mm in takeback debt, or roughly 32% of the $11.7mm invested, with the rest of its claims now equitized. On the other hand, the Non-AHG lender holds $1.6mm in takeback debt, or roughly 14% of its original investment. In summary, both lender groups would be significantly impaired following a transaction like the one above. However, it is important to note that equity upside still does exist. A restructured Empire Today carrying just $200mm of debt could very likely weather today’s demand downturns and eventually accrue value to equity holders. 

Empire Today’s journey from a $1bn LBO to a second restructuring in 15 months offers a couple of important lessons. 

The first lesson stems from the fundamental limitation of liability management exercises as a restructuring tool. Over recent years, LMEs have become the dominant form of restructuring, as they offer speed, lower costs than bankruptcy, and the ability for sponsors to retain equity. However, Empire’s case very clearly illustrates that an LME can only address the liability side of the balance sheet; it cannot fix a broken business model or reverse macroeconomic trends. By most measures, Empire’s November 2024 LME was a well-executed transaction, raising $100mm of new money, extending maturities, and capturing over $50mm in discount. On paper, the deal bought Empire three years of runway at its then-current burn rate. In practice, though, it bought just 15 months before advisors were retained again. The problem with the LME was not its structure, but the inherent assumption that Empire’s business would stabilize or improve. As consumers continued to defer discretionary purchases and mortgage rates remained elevated for longer than expected, Empire’s EBITDA and cash generation continued to plummet, as the company’s fixed cost base and aggressive ad spend worked against it. 

This leads us into our next takeaway, which is that this pattern is increasingly common among 2021-vintage LBOs. Charlesbank paid approximately 10x for Empire at the peak of the COVID home improvement boom, funding the deal with an estimated 6x entry leverage on the company’s highest earnings ever. When demand normalized, and EBITDA collapsed to pre-COVID levels, leverage ballooned from 6x to 12x+ without a single dollar of additional debt being incurred. This reflects the fundamental problem of buying an inherently cyclical business at peak earnings: adding a debt load that the business can only service under favorable conditions. For a business whose demand is heavily dependent on interest rates, homebuying activity, and consumer spending, these fluctuations in demand are inevitable. In Empire’s case, this left the company with a capital structure much too large for the past three years of financial performance. While the 2024 LME attempted to rescue Empire, no amount of new money can bridge the gap between $634mm of debt and $30-40mm of EBITDA. As a result, the most likely outcome for Empire is now a full capital structure reset. The timing of this second restructuring is also particularly challenging, as pending home sales have fallen to their lowest level ever recorded. For a business whose topline is tied to housing turnover, Empire finds itself negotiating a capital structure reset at the absolute trough of its demand cycle. 

Looking ahead, Empire Today’s success will likely depend on its ability to rightsize its capital structure amidst a severe market downturn. Fundamentally, there is nothing wrong with the company’s business model. Empire successfully differentiates itself from competitors in the flooring industry and may have the best brand recognition of any shop-at-home flooring company. However, at this point in time, Empire is simply not the $100mm+ EBITDA business that its current capital structure requires.

This writeup draws on publicly available sources and our independent analysis to present estimates as part of a complete picture. These figures should not be interpreted as company disclosures.

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This analysis is provided for informational and educational purposes only and does not constitute investment advice, legal advice, tax advice, or a recommendation to buy, sell, or hold any security. The content reflects the author's opinions and estimates based on available information and should not be relied upon as the sole basis for any investment or legal decision. Readers should conduct their own due diligence and consult with qualified financial, legal, and tax advisors before making any investment decisions. Past performance and historical analysis do not guarantee future results.