Richmond-based RoomStore files for Chapter 11 protection
Clint Engel, Furniture Today -- Home Accents Today, 12/13/2011 9:51:09 AM
RICHMOND, Va. - RoomStore, the last surviving business segment of the former Heilig-Meyers furniture store chain here, filed for Chapter 11 bankruptcy protection, with plans to reorganize around a smaller core of stores.
In a release, the Furniture/Today Top 100 company said it has secured a commitment from current lender Wells Fargo for a $14 million debtor-in-possession credit facility.
"The restructuring process will facilitate RoomStore's financial and operational plans, which are designed to restore the company to long-term financial health," the company said.
In its Chapter 11 petition, RoomStore said it has assets of $56 million and debts of $52.5 million. Thirteen furniture suppliers and service companies listed among its largest unsecured creditors have claims totaling about $3.8 million. The largest industry supplier listed is Haining Home Craft, owed $503,955.
In a Securities and Exchange Commission document, the Richmond, Va.-based retailer said, "The working capital position and the losses from operations have raised substantial doubt about the company's ability to continue as a going concern."
The reorganization, it said, "is expected to result in the closing of a significant number of stores and reductions in staffing and overhead expenses."
RoomStore noted the decision to file comes after the appointment of CEO Steve Giordano, who took the helm Nov. 14, following the dismissal of former CEO Curtis Kimbrell.
The company's board also has been reorganized and "infused with a new chair, Steve Gidumal of Virtus Capital," replacing Robert Shaffner, who resigned from the board. The board now consists of Giordano, Gidumal and furniture industry veteran and former Levitz executive Ron Kaplan.
RoomStore said it will continue to operate its 63 stores while completing its restructuring, and will also retain its interest in Mattress Discounters.
According to the SEC filing, RoomStore operated 66 RoomStore locations at the end of its second quarter on Aug. 31 in Pennsylvania, Maryland, Virginia, North Carolina, South Carolina, Alabama, Florida and Texas and owns 65% of Mattress Discounters, with 83 bedding specialty stores in Delaware, Maryland, Virginia and Washington, D.C.
It posted a net loss for the quarter of $3.1 million, compared with a $111,000 gain for the same period a year ago. Sales decreased 23.2% to $70.7 million from $92 million a year ago.
For the first half, RoomStore's net loss grew to $7.7 million from a loss of $2.5 million in the first half of 2010. Sales declined 19% to $138 million from $170.6 million.
"RoomStore is a viable and recognizable brand that is an established leader in the home furnishings industry," Giordano said in a release. "Our dedication to providing our customers with excellent value in home furnishings will provide a strong foundation as we grow and improve during restructuring."
In addition to Haining Home Craft, the retailer's largest unsecured creditors listed include manufacturers Klaussner Furniture Inds., owed $389,189; Sealy, $380,865; Haining Oyi May Sofa Co., $365,868; Magnussen Home, $330,012; Hangzhou Yi Bei Furniture, $295,193; Man Wah, $268,699; Franklin, $280,604; Easy Top, $185,462; Steve Silver Co., $168,212; and Hillcraft Furniture, $164,867.
Service providers on the top creditors list include U.S. Quality Furniture Services, owed $320,655, and Old Dominion Fright Lines, owed $232,815.
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