Mercury replaces its chief amid scandal Federal officials investigating case

February 04, 1997|By NEW YORK TIMES NEWS SERVICE

CHICAGO -- The job of leading Mercury Finance Co.'s struggle to avoid bankruptcy was handed over yesterday to William Brandt Jr., an outside corporate turnaround specialist who was brought in last week after the auto-loan company disclosed that its reported earnings had been improperly inflated for four years.

Brandt, 47, replaces John Brincat, 61, as president and chief executive.

Mercury also announced yesterday that the Justice Department had served it with a warrant to search financial records at the company's headquarters in Lake Forest, Ill., for evidence of fraud and other illegal activities.

The U.S. attorney's office assured lawyers for Mercury's board who are conducting their own investigation that the federal evidence-gathering would proceed "cooperatively so as not to disrupt the business," said Kathleen Connelly of the Dilenschneider Group, a public relations firm representing Mercury.

Brandt, meanwhile, spent much of his day meeting with creditors, hoping to arrange short-term loans that would allow Mercury to resume paying commercial lenders on schedule.

Mercury skipped scheduled payments of $23 million yesterday after defaulting on $17 million due Friday. About $60 million more is due this week, but without new loans the company is barely bringing in enough cash for day-to-day operations.

Brandt, however, was optimistic yesterday about the prospects for obtaining a short-term loan. "The meetings with the lenders have been most heartening," he said, adding that the company might soon announce a small short-term loan.

A short-term loan would not address Mercury's basic debt problems but would make it clear that the company could continue in the near future to run its normal business, which consists mostly of buying and collecting on loans automobile dealers have signed with their customers.

"It might not be necessary but it would send a sign of stability," Brandt said.

Such a sign may help Mercury's already battered stock. Worried investors pushed the stock down another 25 cents yesterday, to $1.875, on the New York Stock Exchange. The shares fell 86 percent Friday when trading resumed after a two-day halt.

Brandt disputed predictions on Wall Street that Mercury would soon file for Chapter 11 bankruptcy to gain breathing room from creditors while it reviewed its options, including the possible sale of assets.

Under Chapter 11 of the U.S. Bankruptcy Code, all claims against a company are frozen while it works out a plan to pay off debts under the supervision of a federal judge.

"I'm not contemplating Chapter 11 today, and I won't be tomorrow," Brandt said.

He is certainly no stranger to the benefits and drawbacks of Chapter 11. Although he is not a lawyer, he has been involved in numerous bankruptcies as a trustee, receiver and consultant. His company, Development Specialists Inc., has managed or consulted for a number of financial-service companies in bankruptcy proceedings.

Indeed, lawyers who know Brandt describe him as extremely creative at devising out-of-court resolutions to corporate disasters.

Pub Date: 2/04/97

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