Rent Way held it's Q4, fiscal year ending
conference call today at 4:30pm. As expected, the major topic of
discussion was yesterdays announcement of the sale of 28% of
Rent Ways locations to Rent a Center.
Rent Way CEO Bill Morgenstern described the sale of 295 stores
to Rent a Center "Exciting news". He added "The stores we are
selling account for about 28% of our store count, while they
account for a little less than 25% of our total revenue". "The
vast majority of the stores we sold need significant time and
money to increase their earnings", he said.
Rent Way currently operates in 42 states. As a result of the
sale, the company will exit 5 states completely. California,
Oregon, Washington, Colorado, and South Dakota stores will all
be sold. CEO Bill Morgenstern mentioned that Non-Compete
agreements will be signed for markets exited. No details on the
terms of the non-compete were given.
"Our choices were clear, de-lever the company by selling stock
at depressed prices, or liquefy certain assets".
"This is a decision to take a bold step to solve our financial
difficulties once and for all"
"It's not very often you see a true win-win in a business
transaction...In this case, it is a win-win for both company's
Rent Way CFO Bill McDonnell stated that Rent Way would net
between $65 and $75 million 0f the $101.5 million sale price.
The remainder will be used to pay expenses related to the sale.
Rent Way will be responsible for building and vehicle leases on
stores that Rent a Center decides to close/merge. Rent Way's
agreement with it's lenders does not allow for lower interest
rates as a result of overall debt reduction. As a result,
interest rates on remaining debt will remain around 15%.
Company officials are still hopeful that a re-finance can be
accomplished. The sale of the "underperforming assets" is seen
as a step in that direction.
"No one knows what tomorrow brings, but our ambitions
are to have the re-finance in place by the end of next quarter"
If Rent Way is unable to re-finance existing debt by June 2003,
lenders will receive a 15% equity stake in the company, causing
further dilution of shares.
As a byproduct of the sale, a "rationalization of corporate
overhead", read staffing cuts, will be possible. No specifics
were given, but every position will be evaluated.
Rent Way considered selling it's pre-paid dial tone subsidiary,
DPI Teleconnect to raise capital, but were unable to find a
buyer at the asking price.
"We did look at it, candidly, to try and find a buyer, the price
ranges we got back were unattractive to us"
After a difficult summer, Rent Way has seen some improvement in
October/November, gaining 11,000 customers and 21,000 agreements
during the period.
Listen to the archived audio of the conference call here
See earnings release
and details here
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