Investors in distressed securities are paying unusually high prices for the trade debt of Merry-Go-Round Enterprises Inc., which filed for Chapter 11 bankruptcy protection Tuesday.
"There's speculation there's going to be a good payout," said Sonia Gardner, general counsel for Amroc Investments Inc., which is buying claims of the retailer's top 20 creditors.
A representative with one of the creditors said he's been approached by Amroc as well as Bear, Stearns & Co. and Oppenheimer & Co. with offers of as much as 75 cents on the dollar for his claims.
"They all think they'll get 100 cents on the dollar because the assets are so substantial," said the creditor, who works with a factoring firm, which finances manufacturers' shipments to retailers. "I'll see how high they go."
In contrast, other reorganizing retailers' trade debt is trading at much lower prices.
R. H. Macy & Co.'s trade claims, the claims from suppliers and factors, are trading at about 30 cents on the dollar this week.
Ms. Gardner said her firm thinks Merry-Go-Round could exit from bankruptcy proceedings within a year or two. "It won't be one that's dragged out for three or four years," she said.
Merry-Go-Round sought bankruptcy protection this week after it was unable to secure a new credit agreement and buy spring merchandise for its 1,450 clothing stores.
Factors refused to approve shipments because the company didn't pay its December and January bills.