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Conn’s Names Norman Miller CEO, Sells Off Consumer Debt

In a series of strategic moves designed to shore up its ailing consumer finance business and restore investor confidence, Conn’s has changed chief executives, sold off $1.4 billion in customer credit receivables, and will use the proceeds to pay down debt and repurchase stock.

Assuming the corner office as president/CEO is Norman Miller, who previously served as president of both Sears Automotive and DFC Global, a financial services firm that provides credit to high-risk consumers and small businesses.

He succeeds Theodore Wright, the company’s one-time savior, who will serve as executive chairman through the end of the company’s fiscal year before transitioning to non-executive chairman.

Wright took the company’s helm five years ago when it was on the brink of bankruptcy and returned it to profitability in one year by overhauling operations, focusing on furniture and remodeling stores.

He then embarked on an ambitious geographic build-out that extended the Texas chain’s reach from Colorado to the Carolinas within two years.

While the company’s retail business has largely thrived under the plan, about three-quarters of its sales are paid for with credit from its in-house financing operation, an historic cornerstone of Conn’s. That segment, however, has suffered successive losses — including a $9 million operating loss in the second quarter — as more of its core lower-income customers fall behind in their payments.

Countermeasures including tighter credit terms and increased provisions for bad debts have only crimped sales and added to the losses while failing to curb rising delinquency rates.

Today’s announced actions stem from a soup-to-nuts reevaluation of the business begun last fall. Counseled by an independent financial advisor, the company’s board considered a number of strategic alternatives including a spinoff of the credit segment or a sale of the company.

Instead, Conn’s is securitizing $1.4 billion of its retail installment contract receivables, representing about 77 percent of the outstanding customer receivables portfolio balance, at an all-in cost of 9.1 percent.

The move removes bad debt from its books while providing a cash infusion that will be used to pay down the entire balance of its revolving credit facility and repurchase upwards of $75 million worth of company stock.

The lenders are a consortium of banks that includes Bank of America, JPMorgan Chase, Regions Bank and MUFG Union Bank.

Separately, the board described its appointment of Miller as the culmination of a “long-planned leadership succession,” which also included the naming of Thomas Moran as chief financial officer in July.

In his new role, Miller “will work with senior management and the board to develop strategies to further strengthen Conn’s strategic position,” the company said, with a focus on strengthening its credit and risk function.

In a statement, Miller, a former U.S. Army officer, said Conn’s has a “tremendous opportunity to scale once we set the foundation right to support its growth.

“Given my own modest beginning in life, I have a deep connection to the purpose of Conn’s mission in serving the unbanked consumer and look forward to leading our like-minded employees while meeting our shareholders’ goals.”