Merry-Go-Round delays realignment

March 11, 1994|By Ross Hetrick | Ross Hetrick,Sun Staff Writer

Merry-Go-Round Enterprises Inc., which has been in Chapter 11 bankruptcy since January, will have to wait until October to see the results of its back-to-school sales before it can formulate a reorganization plan, company officials said yesterday.

"We have to be convinced that we have fixed the business," said Michael D. Sullivan, president of the Joppa-based clothing chain with 1,419 stores.

Mr. Sullivan also confirmed yesterday that Paul D. Levine, the president of the company's Merry-Go-Round division, resigned for "personal reasons." Mr. Sullivan has assumed his duties, he said.

Mr. Levine, 44, headed one of the company's largest divisions, with 514 Merry-Go-Round stores under his control. He had worked for the company since 1973 and had been president of the division since 1988.

His departure last Friday follows the December firing of Stuart M. Lucas, president of the Menz division, which had 854 stores.

"It's part of cleaning house," said Peter N. Schaeffer, a partner in Johnson Redbook Service, a New York company that follows the retailing industry.

Mr. Sullivan's comments about when Merry-Go-Round may file a reorganization plan came during the first meeting with creditors.

The company will have to wait for the crucial selling period of August through September before it could draw up a plan on how to repay its creditors, Mr. Sullivan said. Asked after the meeting what would happen if the company was not back to normal by then, he said the reorganization plan might have to be delayed further.

"Obviously, Christmas would be the next check point," he said, adding that it was still too early to speculate.

If the company turns around by the fall season, Merry-Go-Round might emerge from Chapter 11 bankruptcy during the first three or six months of next year, said Roger Frankel, an attorney for Merry-Go-Round. At the time of its filing for reorganization, the company said it had assets of $463 million and liabilities of $265 million.

Despite Merry-Go-Round's debts, there were only 20 people in the audience at a ballroom at the Marriott hotel in downtown Baltimore. Only about five questions were asked by the creditors during the one hour meeting.

Attorneys involved in the case speculated that the smaller creditors -- which account for most of the companies owed money -- have already written off the debt and did not bother to attend the meeting. Creditors also are represented by a committee, which had a lawyer at the session.

The company operates stores under the name of Merry-Go-Round, Boogie's Diner, Toofers, Attivo, Chess King, Cignal, Dejaiz, Silverman's and Hollywood Store.

Mr. Sullivan said the company's 23 percent drop in same-store sales during February, which were reported last week, was mainly the result of inventory levels that were 26 percent below normal.

Low inventory, he said, was caused by delays in ordering the company's spring inventory because of credit problems prompted by its filing for Chapter 11 bankruptcy.

"We're getting a good flow of goods currently," Mr. Sullivan said. But inventory levels will not return to normal until late spring or early summer, he said.

Merry-Go-Round's same-store sales -- those from units opened a year or longer -- have fallen each month since December 1992. Missing from the hearing yesterday was Leonard "Boogie" Weinglass, Merry-Go-Round's chairman and chief executive officer. Mr. Sullivan said Mr. Weinglass had an appointment to interview applicants for the position of general merchandise manager.

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