Creditor set to exercise its clout

June 30, 1994|By Jay Hancock | Jay Hancock,Sun Staff Writer

Fidelity Investments confirmed yesterday what close watchers of the Merry-Go-Round bankruptcy case have assumed for months: that the big mutual fund company will play a significant role in Merry-Go-Round's reorganization.

In a filing with the Securities and Exchange Commission, Fidelity stated that it will "participate actively in the formulation of a Chapter 11 plan of reorganization . . . through discussions with the company."

Fidelity, based in Boston, is Merry-Go-Round's biggest creditor and second-biggest shareholder, having acquired the retailer's securities at distressed prices late last year and early this year. Merry-Go-Round, an apparel seller catering to teens and young adults, landed in bankruptcy court in January.

Fidelity owns more than $90 million in face value of Joppa-based Merry-Go-Round's debt -- enough to block any reorganization plan filed by Merry-Go-Round itself or anybody else. It also owns 9.54 percent of the company's common stock, second only to Leonard "Boogie" Weinglass, Merry-Go-Round's chairman and chief executive.

Such clout makes Fidelity a major player in Merry-Go-Round's fortunes. Yesterday's SEC filing "just formalizes it," said Peter A. Chapman, head of Bankruptcy Creditors' Service Inc. of Princeton, N.J.

Fidelity's conduct in Macy's bankruptcy case this year has indicated its willingness to become closely involved in management and operation of the companies it invests in.

Even so, its Merry-Go-Round filing is an unusually explicit signal of the mutual fund company's intentions, Mr. Chapman added. "Fidelity certainly has not done this in other Chapter 11s" that it has invested in, he said. "They've never made it that clear."

Merry-Go-Round managers apparently were surprised by the filing. Isaac Kaufman, Merry-Go-Round's chief financial officer, told Bloomberg Business News that he was unaware that Fidelity wanted to play an active role.

"I haven't heard them say that," he told Bloomberg. Mr. Kaufman and other Merry-Go-Round officials couldn't be reached for comment yesterday evening.

Mr. Weinglass said Tuesday that he has been meeting with Fidelity officials monthly and that Fidelity had been "supportive, so far."

Neither Fidelity nor Merry-Go-Round have publicly discussed possible reorganization terms. What Fidelity wants, analysts said, is a quick reorganization, an end to Merry-Go-Round's losses and 100 cents on the dollar paid for the debt it owns.

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