Merry-Go-Round Enterprises Inc., the once-hot-now-not operator of specialty stores, said yesterday that it had missed payments to many of its suppliers that were due last Friday, leading factoring companies and analysts to believe it might file for bankruptcy protection.
Because of the missed payments and other concerns, virtually all the major factoring companies, including Heller Financial Inc., CIT Group/Factoring and Rosenthal & Rosenthal, have stopped approving shipments to the Joppa-based company for the second time in a month.
Factoring companies guarantee payment for shipments in exchange for a small percentage of the payment. In addition, many credit agencies have taken Merry-Go-Round off their approved lists.
Michael Sullivan, president of Merry-Go-Round, said in a telephone interview yesterday that bankruptcy was not in the company's plans.
"Nothing is ever out of the question, but that's not the solution we're working towards," he said.
Mr. Sullivan said the company had not paid its bills because it was waiting to work out a new credit agreement with its lenders. Merry-Go-Round, which operates the Merry-Go-Round, Attiva, Cignal and DeJaiz chains, violated certain terms of its credit agreement when it reported an operating loss in the third quarter.
The company had assured the factors and credit agencies that it would have the agreement worked out by Dec. 7, but at least one of its eight lenders is insisting that Merry-Go-Round collateralize its inventory before it will approve a revised credit line.
If Merry-Go-Round agrees to do that, however, it risks upsetting the factoring companies because such an agreement would put them in a riskier position, Mr. Sullivan said.
"We do feel like we're making progress in the negotiations, but it's two steps forward, one step back," he said. He said that once the company came to an agreement with the banks and insurance companies that finance its credit line, it would pay its bills.
Shares of Merry-Go-Round closed yesterday at $6.25, unchanged, on the New York Stock Exchange.
Credit executives, who spoke on condition of anonymity, said that unless the company restructures its line of credit, it would be forced into bankruptcy because suppliers would refuse to ship goods.
Earlier this month, the company sought to calm a similar panic in the industry by dismissing a number of merchandising executives, writing off inventory and bringing back Leonard "Boogie" Weinglass, one of its founders.
Still, Merry-Go-Round failed to pay suppliers Friday and has not returned telephone calls from factoring companies that were seeking an explanation for the delay.