Rose hopes to stay open with creditors deal
By Clint Engel -- Furniture Today, February 11, 2007
High Point — Rose Furniture has reached an agreement with its creditors committee that calls for partial payment of its debts and allows the retailer to stay in business, avoiding Chapter 7 bankruptcy liquidation.
Unsecured creditors would receive a cash payment equal to 11.5% of their allowed claims within 15 days of the plan's effective date, Rose said in a release.
In addition, they can receive either periodic cash payments over about two years for another 18.5% of their claims or a 3.5% payment 45 days after the plan takes effect. This would give them a total of up to 30 cents on each dollar of claims
James Cullen, consultant and advisor with Alliance Management, which Rose brought in for help in August, couldn't say when the plan will take effect. "We're working on that," he said.
For the plan to take effect, creditors representing 90% of the outstanding unsecured claims must accept an out-of-court agreement. Claims in that category total about $10 million, said Angie Mills, director of customer financial services for manufacturer Bernhardt and a member of the creditors committee.
"We're waiting to hear back from unsecured creditors to see if the 90% threshold would be reached," she said.
Rose hopes the plan can take effect April 1 but still has issues to resolve that can't be handled until this agreement is reached, including staffing, samples and regular vendor support of ongoing operations, she said.
In addition to the creditor payout, the plan would give Rose customers who made cash deposits a 50% payment 30 days after the effective date of the plan, and either a second 50% payment or 100% store credit 180 days after the date.
"The reason for this (out-of-court plan) is the substantial cost saving to Rose and resulting availability of cash to pay creditors," the retailer said in the release.
Dave Carpenter, director of financial services with La-Z-Boy Greensboro and a member of the creditors committee, agreed that avoiding bankruptcy is the best possible outcome for suppliers, even though they won't get all their money back.
"In any case of corporate insolvency, it is rare for unsecured creditors to receive cash payments exceeding 5% of claims," he said. "To have a potential recovery of 30% in the Rose case I believe can be considered a success."
La-Z-Boy companies American Drew, Lea, Clayton Marcus, Pennsylvania House and Sam Moore stopped shipping the retailer last year. Asked if the La-Z-Boy suppliers will resume shipping if the plan is approved, Carpenter said that decision will have to be made after he sees financial information on Rose's new business plan.
"We're absolutely delighted to be able to stay in business, and we are extremely grateful for the continued support and patience of our vendors and customers," said Rose President Buck Kester.
He said the company will adopt "a new business model and merchandising format," but didn't disclose details.
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