Will it be enough? Will the $100 million sale of 295 stores be enough to put Rent Way back on the path to profitability?

Rent Way has been laboring under the crushing weight of a $300 million, (currently $285 million) 16% debt load. Interest payments of that magnitude accounted for a large portion of recent red ink.

Despite announcements of 'plans in the works', it was becoming obvious that lenders were unwilling to re-finance Rent Way's debt without a significant change in structure. Several initiatives were undertaken; Cost cutting initiatives including staffing reductions, marketing campaigns, 120 days SAC, etc. None had a significant impact on results. The sale of these stores will reduce debt by about 25%, (Rent Way expects to net 65-75 million) making a refinance more attractive to lenders. Revenue will also decrease by 1/3, Correction: Revenue will decrease by 25%, so the net effect on Rent Way's future is unclear.

The selling price was high by today's standards, 10 times monthly revenue.  Rent a Center reported during the Q3 conference call that they typically pay between 6 and 10 times revenue for acquisitions, less for account only purchases, more for an entire operation. While there is significant value in being able to increase your store count by 10% in a single acquisition, many of the acquired stores are in markets already penetrated by Rent a Center.

Employees
How this will affect the 1,000 plus Rent Way employees is unknown. Getting this type of news is disturbing anytime...being told that your "Destiny is unclear", and your "Position will be evaluated" 7 days before Christmas is disturbing at best, terrifying at worst. 24 hours have passed since the announcement. The initial shock has worn off and fear is turning to anger. Logically, employees know it's the right decision. Emotionally, it's a whole different ballgame.

The $64,000 question is 'Will it be enough'? A consensus among experts seems to be... maybe. One analyst referred to the sale as "A tough decision that is absolutely necessary for the short term survival, and long term health, of Rent Way". Another stated "This was a 'have to', not a 'want to' deal". She added, "Sometimes you have to cut off an arm to save the body".