Bankruptcy Expenses, Fees Burn Unsecured Creditors
Larry Thomas -- Furniture Today, June 16, 2011
The sad tale of Heilig-Meyers, once the nation's largest furniture retailer, quietly came to an end on Dec. 31 and hardly anybody noticed.
That's the day the U.S. Bankruptcy Court in Richmond, Va., officially closed the Chapter 11 case that shook the industry when it was filed on Aug. 16, 2000.
There were some $900 million in claims from unsecured creditors, about 1,000 stores that would soon close, and untold thousands of employees without a paycheck - but with lots of worthless Heilig-Meyers stock. In the more than 10 years the case was open, 6,969 entries were made on the court's docket sheet (most bankruptcy cases have a few hundred entries), and tens of thousands of pages of motions, objections to motions, responses to objections, court orders and other reports were filed.
Since February 2006, most of the court filings chronicled the activities of the Heilig-Meyers Liquidation Trust, which was formed to liquidate the company's remaining assets and make distributions to creditors. That was no simple undertaking, given the size of the company and complexity of its finances.
The first checks to unsecured creditors didn't go out until February 2008, and the second and final round of distributions was made in December 2009. The latter payout also included 7,006,005 shares of stock in The RoomStore, the Richmond-based publicly held retailer that was spun off from Heilig in 2005 as part of the bankruptcy process.
The cash the unsecured creditors received was nothing to celebrate. The report shows the payouts represented 5.02% to 6.18% of their original claims.
Of the $86.5 million paid by the trust, some $51.1 million - about 59% of the total - was spent on professional fees and administrative expenses. Another $7.69 million went to satisfy additional administrative claims, and $6.17 million went to priority creditors. That left just $20.9 million for unsecured creditors.
Another long-running bankruptcy case, that of former New Jersey-based Top 100 retailer Rockaway Bedding, was scheduled to be closed this month, but the trustee in the four-year-old case has asked to keep it open while he tries to force some of the lawyers and other bankruptcy professionals involved in the case to disgorge a portion of their fees. That may sound like a laughable proposition, but it's the only hope unsecured creditors have of recouping any of their $26.5 million in claims. Trustee Edward Gavin said in a court filing the company "remains administratively insolvent."
Gavin did force former owner Anthony Licastro to repay $475,000 of company funds allegedly used to pay personal expenses of Licastro and his family (Gavin originally demanded $3.5 million), but nearly all of that money went for - you guessed it - administrative expenses and professional fees.
- Aug 3, 2012