Companies usually go public to raise money. But the latest Richmond-area firm to take that route has issued shares to settle an old debt -- an obligation owed by someone else.
The RoomStore Inc. reported that a trust has distributed the first batch of what eventually will total 7 million shares of stock to creditors of the bankrupt Heilig-Meyers Co., the Goochland County-based chain that was the parent company of The RoomStore. Heilig-Meyers was once the nation's largest home-furnishings retailer.
As part of that process, The RoomStore, also based in Goochland, formally has registered its stock with the U.S. Securities and Exchange. Additionally, it disclosed that it plans to list the shares on the NYSE Amex, formerly the American Stock Exchange.
"This isn't a usual thing," said Brian D. Bertonneau, The RoomStore's corporate secretary. "This isn't really an IPO [initial public offering] since we're not raising money. It's a distribution to bankruptcy creditors."
It has been more than three years coming, too.
As part of Heilig-Meyers' bankruptcy case, The RoomStore was carved off as a stand-alone company, with a promise that it would issue a 30 percent ownership interest to its creditors and a 70 percent stake to Heilig-Meyers' unsecured creditors.
The RoomStore issued just more than 2.8 million shares to 730 creditors in November 2006, and it has since repurchased more than 64,000 from 450 of them.
Yesterday, The RoomStore issued 2.9 million shares to 5,027 Heilig-Meyers creditors.
The remaining 4.1 million shares will go to the rest of Heilig-Meyers' creditors when a technical question about transfer process is settled, Bertonneau said. Only a handful of creditors are involved, he said.
Meanwhile, as a result of registering the shares, The RoomStore opened a window on its business. The retailer disclosed that sales slipped 6.5 percent to $159.1 million for the six months that ended Aug. 31, while its net loss more than doubled to $4.7 million.
The first half is usually the company's slowest period, the retailer reported.
The chain, which operates 67 stores, said it has been hurt by the slowdown in home sales. It noted that it also has seen increasing competition from big-box furniture stores, such as Rooms To Go and Ashley Furniture, in several of its markets, including Richmond; Myrtle Beach, S.C.; and Wilmington, N.C.; as well as in Texas.
Contact David Ress at (804) 649-6051 or dress@timesdispatch.com.
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