Interco Inc. Files for Protection

The junk bonds that were supposed to save Interco Inc. from an unwanted takeover in the late 1980s pushed the company into bankruptcy court Friday.

The footwear and furniture manufacturer has been struggling to restructure more than $1.65 billion in debt, much of it in high-interest junk bonds sold as part of its defense against the hostile 1988 takeover attempt by investors Steven and Mitchell Rales of Washington.

With the filing, Interco joined other companies that took on heavy takeover-related debt in the 1980s, only to end up in bankruptcy. The most recent was the G. Heileman Brewing Co., which filed for Chapter 11 Thursday.

A lackluster performance so far this year also forced Interco to seek protection from its creditors. The company posted a loss of $110.1 million on revenues of $1.09 billion for the first three quarters of its fiscal year.

Interco and its creditors reached a tentative agreement to restructure the company’s debt in August, but months of negotiations to implement the plan have been unsuccessful.

Talks toward a pre-packaged bankruptcy reorganization plan, one that would have had the approval of all creditors before its filing, also fell through, said Wilbur Ross, a managing director at Rothschild Inc., a New York-based investment firm that serves as chief negotiator for Interco’s bondholders.