Blue jeans at the office claimed another victim yesterday. Plaid Clothing Group Inc., a big maker of men's tailored clothing and owner of J. Schoeneman Inc. in Owings Mills, sought protection from creditors in U.S. Bankruptcy Court in New York.
Plaid, with assets of $195 million and liabilities of $177 million, will try to reorganize under Chapter 11 of the bankruptcy code and emerge "leaner, stronger and more focused," said Richard C. Marcus, the company's chief executive officer.
That means cutting costs. Plaid executives plan to seek expense reductions in manufacturing overhead, selling, distribution and administration, the company said.
"We can't predict or forecast how any facility is going to be impacted," Mr. Marcus said. But the turmoil raises questions about Plaid's future in Maryland and its 50 administrative employees at Schoeneman's headquarters in Owings Mills.
Plaid has been shrinking its Maryland presence, closing a 110-worker Schoeneman raincoat plant in Bel Air last year and moving a 55-person Schoeneman warehouse operation from Owings Mills to Chambersburg, Pa.
Speaking of the remaining Owings Mills workers, James F. Haneschlager, Schoeneman's vice president of human resources, said: "No determination has been made on their situation."
Like other men's tailored-clothing makers, such as Hampstead-based Jos. A. Bank Clothiers Inc., Plaid has been hurt by the growing trend of casual attire in the workplace. The company, which booked $263 million in sales last year, owns the prestigious Palm Beach tailored-clothing brand and handles other labels such as Gant, Evan-Picone, Burberry and Nicole Miller.
"The retail situation for men's tailored clothing has been at best spotty and at worst terrible for most of the major department-store companies that are the customers of the Plaid Clothing Group," said Alan Millstein, publisher of Fashion Network Report, a New York-based newsletter.
Plaid has also struggled in a generally weak apparel market, as consumers have switched spending in recent years from clothes to home furnishings and electronics.
The immediate reason for the bankruptcy filing was an impending default on a $4.2 million bond-interest payment and the resulting threat of suppliers to suspend shipments, Mr. Marcus said. Bankruptcy proceedings give Plaid access to new financing, reassuring vendors.
"We did not want to put our spring season at risk," Mr. Marcus said in an interview. He also blamed problems at Plaid plants that delayed spring shipments and hurt sales.
Mr. Marcus discounted Plaid's failed attempt last year to acquire an Italian apparel company as a factor in the bankruptcy. But analyst Mr. Millstein said the botched buyout of Gruppo Finanziario Tessile SpA, which cost Plaid $15.2 million, helped push the company into Chapter 11.
Plaid's valuable brands and manufacturing licenses should allow it to emerge from bankruptcy, Mr. Mill- stein said.
Unsecured creditors of Plaid can expect to receive something like 50 cents on the dollar of what they're owed, said Peter Chapman, president of Bankruptcy Creditors' Service Inc., based in Princeton, N.J. Secured creditors would get repaid partially in Plaid stock, Mr. Chapman said. That development would erode the ownership of controlling Plaid shareholder Omar Z. Al Askari, a Middle Eastern investor.
Plaid's biggest unsecured creditor is Burlington Industries Inc., a textile company based in Greensboro, N.C., according to court filings. Burlington is owed $5.3 million.