Smith Corona files in bankruptcy court

July 06, 1995|By Bloomberg Business News

NEW CANAAN, Conn. -- Smith Corona Corp. filed for bankruptcy court protection yesterday and said it could go out of business, as the personal computer has crushed its century-old typewriter business.

Company attorney Laura Davis Jones said in a bankruptcy court hearing that a recent drop in revenue caused a cash-flow problem that forced the Chapter 11 filing. The company also said it sought court protection to help line up financing and carry out a plan to cut its work force by 26 percent.

Smith Corona -- the last U.S. typewriter maker -- has been hurt as consumers increasingly turned to personal computers. The near extinction of typewriters, first patented in 1868, makes liquidation most likely for Smith Corona, a bankruptcy expert said.

"What do you do with your old electronics equipment? You take it to the curb," said Peter Chapman, president of Bankruptcy Creditors' Service Inc.

Ms. Jones said the New Canaan-based company would need about 30 to 40 days of "breathing room" to determine if it will be able to salvage part of its operations or if it will liquidate its entire business. Smith Corona also makes personal word processors and other office equipment.

The filing in Wilmington, Del., came four days after the company hired a turnaround firm and changed top management.

In the past few months, Smith Corona has slashed its work force, violated its credit agreement, reported a third-quarter loss and suspended its dividend payments.

"Our first priority is to stabilize our operations in the very short term," said Ron Stengel, interim president and chief executive.

His company, R. H. Stengel & Co., was brought in as a "crisis manager" Saturday night, Ms. Jones said.

U.S. Bankruptcy Court Judge Helen Balick approved an agreement late yesterday between the company and its bank lenders allowing the company to use up to $1.5 million of the hTC banks' cash collateral through July 10. The agreement resolves the immediate liquidity problem.

Smith Corona will continue to negotiate with lender Chemical Bank for debtor-in-possession financing.

If the company and Chemical Bank can't reach an agreement by July 10, Smith Corona attorneys will go before Judge Balick to ask for permission to go to the backup debtor-in-possession lender, Foothill Capital Corp., which agreed to a $20 million loan.

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