Rentway agrees to settle lawsuit
By Furniture Today Staff -- Furniture Today, March 23, 2003
Erie, Pa. — Rent-to-own retailer Rent-Way has agreed to settle for $25 million a class-action lawsuit alleging falsified financial statements. The agreement must be approved by a federal court.
The company said the settlement would consist of $21 million in cash — $11 million of which will be funded from insurance proceeds — and $4 million in two-year notes at 6% interest. The settlement is conditioned on the company's restructuring of its bank debt by July 31.
The suit, filed in the Western District of Pennsylvania on behalf of Rent-Way shareholders, claimed the company's financial statements in 1998, 1999 and 2000 were materially false because of accounting irregularities. The company restated its results for those years, saying that operating expenses had been improperly reduced by $129 million.
"This settlement is an important step forward for Rent-Way," said William Morgenstern, the company's chairman and chief executive officer. "We are now better positioned to refinance our outstanding bank debt on more favorable terms. This will allow us to execute our business plan at a significantly lower cost."
Rent-Way had debt of $285 million on Dec. 31. It had 2002 revenue of $626.4 million, and operates 759 stores in 33 states, renting merchandise including furniture, appliances, computers and other consumer electronics.
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