Wachovia objects to disclosure statement for Heilig-Meyers' RoomStore unit

By Ellen Chang

Houston, March 2 - Wachovia Bank said it objects to the proposed disclosure statement for the joint plan of reorganization of HMY RoomStore, Inc., a subsidiary of Heilig-Meyers Co., according to a Tuesday filing with the U.S. Bankruptcy Court for the Eastern District of Virginia.

Wachovia protested that the plan contains inadequate disclosure because there is no an attempt to place "any value on, or even identify, the miscellaneous RoomStore assets being transferred by the liquidating debtors to RoomStore."

RoomStore had also taken 18 retail stores belonging to the furniture company and also confiscated other assets such as distribution centers, computer systems and equipment, Wachovia asserts.

"It is impossible to evaluate the fairness of the proposed settlement in the RoomStore plan if the specific assets being transferred to RoomStore are not identified and fairly valued," the filing said.

Wachovia also said there is no attempt to identify or quantify the miscellaneous RoomStore assumed liabilities.

Wachovia said the disclosure statement also argues that RoomStore has subsidized the administrative costs of the Chapter 11 cases, but the claim is not supported with any facts.

The bank, which is the collateral and administrative agent for Heilig-Meyers' pre-bankruptcy bank debt, is also disputing the $57.9 million claim owed by RoomStore to Heilig-Meyers. Wachovia said the statement does not contain information about the derivation of the $57.9 million intercompany claim and it does not provide information for creditors to evaluate whether this claim "represents bona fide debt against RoomStore which should share pro rata with other creditors or whether it represents a capital contribution by Heilig-Meyers which should be treated as equity."

The bank also said the statement lacks any material information about exit financing and material information about the variation in the RoomStore valuation. The company is currently valued at $45 million, but was valued at $60 million in the September disclosure statement, the bank noted.

Wachovia said that any successful reorganization plan and disclosure process for HMY RoomStore depends on the appointment of an independent fiduciary.

Wachovia had previously filed a motion seeking that Heilig-Meyers and HMY RoomStore convert to Chapter 7.

The plan of reorganization and disclosure statement calls for HMY RoomStore to emerge from Chapter 11 as the reorganized business.

Heilig-Meyers previously filed its own reorganization plan with the U.S. Bankruptcy Court for the Eastern District of Virginia. Under the plan, creditors of the parent company will receive interests in a liquidation trust.

Both plans have been jointly proposed with the official committee of unsecured creditors.

Both Heilig-Meyers and RoomStore are Richmond, Va.-based home furnishing retailers.

Heilig-Meyers filed for bankruptcy on Aug. 16, 2000. Its Chapter 11 case number is 00-34533.

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