The RoomStore, a widely known Arizona furniture chain, plans to go out of business after a long liquidation process, an attorney for the company said Tuesday in Bankruptcy Court.
It was the first court hearing on the Chapter 11 bankruptcy petition filed last week by the 11-store chain.
Attorney Carolyn Johnsen sought the court's swift approval for a plan that would turn the company over to an outside liquidator that would take up to six months to sell off the RoomStore's furniture inventory.
The inventory would be bolstered during the liquidation by new offerings, in order to maximize payments to creditors.
"The best sale in the furniture industry is a going-out-of-business sale," said Alan Levitz, chief executive of the RoomStore.
The company expects to lose $2 million this year. Sales peaked at more than $120 million before the real estate bust. Since then, they've plunged 50 percent, as furniture megastores clobber the smaller RoomStore chain.
Chapter 11 filings typically give a company shelter from creditors so it can reorganize as a leaner entity. But there was little talk of reorganization in the RoomStore plan.
Johnsen, Roomstore's bankruptcy attorney, said the money-losing company couldn't get the money it needed to stay open. The liquidator has now provided some of that money.
RoomStore has nine stores in the Valley, one in Casa Grande and one in Prescott.
The plan would protect the 3,700 customers who've made down payments on furniture purchases, Johnsen said. Gift cards and store warranties will also be honored.
"We don't need to have customers disgruntled at this point," Johnsen said.
Under the plan, RoomStore's 350 employees would eventually be out of a job.
"Many of the employees are low-wage earners and clearly rely on each paycheck to make ends meet," the company's bankruptcy filing says.
Johnsen said the company running the liquidation sale might not want to keep on all of those employees. In the meantime, Johnsen said, RoomStore has filed a mass layoff warning notice with the State of Arizona -- a 60-day warning of potential closures and layoffs.
The company's agreement with the liquidators would pay Levitz $9,600 a month as a consultant.
Bankruptcy Judge Daniel Collins wanted an explanation of the salary as well as many other pieces of the RoomStore's plan. He set a hearing for for Jan. 6.
