The future of the second largest
rent to own company in the nation hinges on CEO
Bill Morgenstern's ability to refinance the company's 15% debt.
Yesterday, the company announced a $25 million settlement of the
class action lawsuit brought by shareholders. The
settlement must be given final court approval and is contingent
upon the long sought after refinance.
The suit was filed by shareholders after the announcement of
'accounting irregularities' that resulted in RWY losing 80% of
it's value in a single day.
Rent Way eventually restated results by $129 million. Mathew
Marini, former CFO was fired, and Jeff Conway, former president
and COO was forced to resign. Federal investigations are
Bill Morgenstern, unlike CEO's of other companies under
similar circumstances, remains at the helm. He maintains that he had no knowledge
of the bogus accounting. The Board of Directors apparently agrees and
have maintained their support for Mr. Morgenstern during the 2
Company officials admit the absolute necessity of refinancing
the overwhelming debt load. In December, Bill Morgenstern said
that his "ambition" was to have re-finance complete by March
"No one knows what tomorrow brings, but our ambitions
are to have the re-finance in place by the end of next quarter"
In early January,
S&P lowered Rent Way's credit rating based on concern about
Rent-Way's ability to refinance its bank loan that matures in
December 2003, and the uncertain outcome of federal
investigations and class action lawsuits against the company.
The next few months will tell the tale. As of December 31st, the
company reported $285 million in debt. If the company is able to
refinance at a reasonable rate, the future looks bright, if
not...lenders may receive a 15% equity stake in the company,
causing further dilution of shares, and the class action
settlement announced yesterday would likely go back to the
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