Cosmetic Center owes creditors $71 million

Columbia retailer's largest debt is to Revlon $2 million

Bankruptcy

April 20, 1999|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

The Cosmetic Center Inc., the Columbia-based retailer that sought bankruptcy protection late Friday, is struggling under a debt load of $71 million, according to court documents that became available yesterday.

The discount cosmetics chain reported total debt of $71,129,062, with assets of $95,080,389 in a Chapter 11 petition filed after hours Friday in U.S. Bankruptcy Court in Wilmington, Del.

The chain listed Revlon Consumer Products of New York as its biggest creditor, owed more than $2 million.

Other major creditors include manufacturers such as Elizabeth Arden, Johnson & Johnson and Procter & Gamble Distribution Co.

Cosmetic Center "determined that the filing was necessary due to the large number of underperforming stores it is exiting," Wendi Kopsick, company spokeswoman, said yesterday. "It's not the result of a lack of vendor support or inability to receive shipments. The inventory position is strong."

The chain is closing 26 Cosmetic Centers and 90 outlet stores that did not meet expectations, pulling out of the Chicago and North Carolina markets entirely to stem losses and cut operating costs. It is also firing 875 workers.

Chapter 11, which offers protection from creditors while the company works out a reorganization plan, will enable the chain to shed some of its costly leases, Kopsick said.

In connection with the filing, the company has a commitment for $50 million debtor-in-possession financing from BankBoston Retail Finance and Congress Financial Corp., approved yesterday by the Bankruptcy Court, Kopsick said.

The chain will also get a significant line of credit from Revlon, she said. In addition, the company expects to raise cash through liquidation sales, Kopsick said.

"As a result, following the store closings, the company is convinced it can revitalize the business and return the company to profitability," she said.

Kevin Regan, a former director of PricewaterhouseCoopers who took over as chief executive officer Friday, said through Kopsick yesterday that it was too soon to discuss his strategy for the chain, which hasn't reported a profit since 1995.

Before joining PricewaterhouseCoopers in 1996, Regan spent 12 years at discount retailer Jamesway Corp., as chief financial officer, senior vice president of finance and, later, executive vice president.

He had been a chief administrative officer for Seattle Standard, a holding company for retailers such as Buymart, Pay and Save, Lamonts and Northwestern Drug, as well as a chief financial officer of Linens & Things.

Regan replaced Betsy Burton, a turnaround specialist brought in less than a year ago. The company announced Burton's resignation Friday, along with that of Dwight Crawley, chief financial officer.

The company's latest financial troubles stemmed from a merger in 1997 with Revlon Inc., which retail experts said interrupted the flow of goods and drained the company's profit.

The chain will continue operating 31 Cosmetic Center stores primarily in Maryland and Virginia, and 93 Prestige Fragrances & Cosmetics outlet stores in 27 states. Three Maryland Cosmetic Center stores will close.

Pub Date: 4/20/99

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