Ten days into the job, new Chief Executive Richard P. Crystal announced yesterday that Merry-Go-Round Enterprises Inc. has obtained a $90 million line of credit, offering breathing room for the fashion retailer mired in Chapter 11 bankruptcy.
"This agreement with our new lenders will give MGRE [Merry-Go-Round Enterprises] greater operating flexibility," Mr. Crystal said in a statement. "This is extremely important as we continue to refine our merchandising strategies in an effort to restore top-line growth."
Some industry observers say the credit line, called a debtor-in-possession working capital facility, or DIP, is merely meant to restore confidence in vendors who supply the national retail chain of about 980 stores designed for teen-agers and young adults.
"The bottom line is, the company is not borrowing money, this is for image purposes, this is to try to gain the confidence of some vendors," said Peter Chapman, who tracks the company as president of Bankruptcy Creditors' Service Inc. in Princeton, N.J.
"The chances are, Merry-Go-Round is never going to draw on this line of credit because they did not draw on their previous DIP facilities."
Under Merry-Go-Round's original line of credit, closed after the company filed for bankruptcy protection in January 1994, New York-based CIT Group/Business Credit Inc., agreed to lend the retailer up to $125 million.
Merry-Go-Round's agreement with GE Capital of Stamford, Conn., and New York's Citicorp USA offers higher credit advance rates against inventory, a spokesman said.