|RoomStore emerging on its own|
May 19, 2005 (Richmond Times-Dispatch - Knight Ridder/Tribune Business News via COMTEX) -- The final remnant of former bankrupt home furnishings giant Heilig-Meyers Co. becomes an independent company in two weeks.
It has taken The RoomStore division nearly five years to achieve autonomous status to begin a new chapter in its corporate life.
Yesterday, U.S. Bankruptcy Judge Douglas O. Tice Jr. entered an order giving The RoomStore permission to emerge from the court's protection effective June 1.
Heilig-Meyers, once the nation's largest furniture chain, filed for bankruptcy protection in August 2000. The Richmond-based retailer has since shut down all of its operations.
All that remains is The RoomStore division of 65 stores.
"This is an enormous step for what was once a very small operating division of a former significant public company," said Bruce Matson, a lawyer with LeClair Ryan who is representing Heilig-Meyers in its bankruptcy case.
"It has been a long time coming, but it is certainly worth the wait," said Curtis C. Kimbrell, who has been president and chief executive officer of The RoomStore since May 2001. "This gives us an opportunity to operate without having one hand tied behind our back. This opens up a lot of doors for us that have been closed."
The RoomStore, he said, is on solid footing. It generated $330.5 million in sales for the fiscal year that ended Feb. 28, essentially flat from the previous year. But the division has produced positive cash flow and earnings before interest expense, income taxes, depreciation and amortization.
Officials are now working on details to have Bank of America provide financing after June 1.
While for many who saw the liquidation of Heilig-Meyers as the end of its operations, The RoomStore division continued to push along and found a niche in the marketplace, Matson said.
But the bankruptcy case is not over.
The plan separates The RoomStore operations from the rest of Heilig-Meyers.
Stock in the new The RoomStore will be issued exclusively to the division's unsecured creditors. It should be valued at a total of about $45 million.
Creditors would receive no money for their claims, but the stock they receive should be worth about 50.4 cents of each dollar owed.
Shares in the new company likely would be publicly traded in the future, Matson said.
About 28 percent of the shares will go to unsecured creditors of only The RoomStore, such as suppliers and vendors. About 5 percent will be reserved for officers and key managers as an incentive.
The remaining 67 percent of the stock would be issued to a trust being created to oversee the final stages of the Heilig-Meyers bankruptcy case.
A hearing on the rest of the Heilig-Meyers bankruptcy case is scheduled to be held in late September. Under that plan, a trustee would have the right to distribute the shares of The RoomStore stock to creditors of Heilig-Meyers or sell the stock and give the creditors cash.
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