Interco Files For Bankruptcy
ST. LOUIS (AP) _ Interco Inc., the footwear and furniture maker struggling with a heavy load of junk bond debt, filed for Chapter 11 protection from its creditors today, seeking a stable environment in which to reorganize itself.
″The Chapter 11 filing will give the company the opportunity to complete negotiations on a restructuring plan while protecting the interests of the companies,″ said Richard Loynd, Interco’s chairman and chief executive officer.
Interco has been struggling to pay off its large junk-bond debt since it borrowed $1.65 billion in 1988 to fend off a hostile takeover attempt by corporate raiders Steven and Michael Rales.
At the time, the company made men’s and women’s apparel including London Fog rainwear, operated 201 retail stores such as do-it-yourself hardware stores and discount clothing stores, and owned footwear and furniture manufacturers and stores.
To pay off its debt, the company announced plans to sell off all of its companies except the four it currently operates: Converse and Florsheim footwear manufacturers along with furniture makers Lane Co. and Broyhill Industries.
That plan faltered, however, when the subsidiaries were sold for far less than what the company anticipated.
In August, Interco reached a complicated agreement with its creditors to restructure its debt by having bondholders exchange their bonds for 95 percent of the company’s common stock and other considerations.
Under that plan, Interco would undertake a 23.5-for-1 reverse stock split of the company’s roughly 47 million shares of common stock, issue 98 million new shares of stock and take on $202 million in new debt.
Since August, negotiations have been under way to put the agreement into effect, and up until last week Loynd said the talks were going well.
He said today the bankruptcy filing would allow those negotiations to continue while protecting Interco’s core companies.
″It is essential that Interco maintains and builds the strengths of its core companies ... All are industry leaders with excellent consumer franchises,″ Loynd said.