Heilig-Meyers Bankruptcy Program Approved

The troubled Heilig-Meyers Co. (Richmond, Va.) has received court approval for its proposed liquidation program. The furniture retailer has entered into an agreement with Great American Group, Gordon Brothers Retail Partners, LLC and The Nassi Group, LLC to conduct liquidation sales in the stores that the company has identified for closing. The closing sales will begin within the next week and are scheduled to take 45 to 60 days to complete.

The court also approved the bankrupt retail organization's plan to outsource its customer credit program. The court decision clears the way for the furniture retailer's first major step towards reorganization. The company has finalized interim agreements with Household Financial, which will serve as the primary credit provider, together with a series of secondary providers. The company expects to finalize a long-term agreement with Household Financial within the next 60 days. Heilig-Meyers had been running itsown in-house credit program for over 80 years. But, said ceo Donald S. Shaffer, “increased costs, including funding cost, portfolio risk and administration does not allow for an adequate return on the capital required to sustain the program in its historical manner. The elimination of these costs, and the absence of the need to fund the receivables, should dramatically improve our liquidity situation going forward.” It was credit problems that had largely been blamed for the retailer's troubles. It had depended for profits largely on the loans it made to customers, but was getting squeezed by increasing competition of subprime lenders, which led to a lowering of credit standards and an increase in loan defaults. (There was one estimate that one of every nine Americans who declared bankruptcy in 1997 listed Heilig-Meyers among its creditors.)

The retailer's 54 new-format RoomStores, which had been receiving positive customer reaction since their opening in, 1998, will not be impacted by the new credit arrangement.

Heilig-Meyers, the nation's largest retail chain selling home furnishings and related items (with more than 800 stores), filed Chapter 11 petitions in the U.S. Bankruptcy Court in August.