A Texas investor who controls 106,000 shares of stock in Merry-Go-Round Enterprises Inc. has objected to the Joppa-based retailer's tentative plan of bankruptcy reorganization.
But Edwin A. Allseitz Jr.'s filing in U.S. Bankruptcy Court in Baltimore is not expected to derail a reorganization scheme that the company's major creditors and shareholder committee have tentatively approved.
Mr. Allseitz, a Dickinson, Texas, stockbroker, argued that the existing plan would unfairly profit Merry-Go-Round's creditors at the expense of shareholders.
The company's plan would give creditors up to $130 million in cash and paper and 75 percent of the stock. That is far more stock than what is needed to repay creditors' estimated claims plus interest of $296 million, Mr. Allseitz said.
Merry-Go-Round's value is higher than what the company's reorganization plan would indicate, Mr. Allseitz argued. He said a slump in the apparel industry has temporarily depressed Merry-Go-Round's sales.
Mr. Allseitz offered an alternative reorganization plan under which present shareholders would retain 71 percent of the ownership in a reorganized company.
For the year ended Jan. 29, Merry-Go-Round had operating losses of $52.5 million on $782.8 million in sales.
Its stock closed yesterday at $1, up 12.5 cents.