Standard Brands Seeks Bankruptcy Protection : Retailing: The firm was weakened by the recession and expensive attempts to fend off takeover bids.
Standard Brands Paint Co., a paint maker and do-it-yourself retailer burdened for several years by heavy debts and stiffened competition, on Tuesday filed for protection from creditors in U.S. bankruptcy court.
The Torrance-based company said it made the Chapter 11 filing in Los Angeles after failing to reach an agreement with its lenders and possible investors on a financial bailout. Standard Brands said it also had been cut off by suppliers worried about the company’s deteriorating financial condition.
In a news release, Carl Bellini, the company’s chief operating officer, said Standard Brands’ 135 paint stores, all in the West, “remain open for business as usual.” Bellini said the company expects its suppliers to resume shipments immediately as a result of a $17-million credit line it tentatively arranged under Chapter 11.
A company spokesman said there are no plans to close stores or lay off any of its 2,100 employees. Standard Brands also operates two manufacturing plants.
In Chapter 11 bankruptcy, debtors are shielded from creditors’ lawsuits while they try to work out their financial problems and draw up a reorganization plan. To provide lenders an incentive to issue new financing to Chapter 11 companies, the bankruptcy courts give them a priority claim on the borrower’s assets.
Bellini said the company’s new credit line will enable it “to return to its core paint business and reorganize its finances.” In recent years, the company tried, unsuccessfully, to boost its business by selling other home improvement products.
“Customers should anticipate that their deposits will be honored and credit cards welcomed,” Bellini said. “This filing was made to permit a financial restructuring that will allow us to continue to operate without interruption, and to emerge later as a stronger company.”
Although there are no plans to close stores or lay off employees, Standard Brands might be forced to sell at least some of its assets to emerge from bankruptcy. A spokeswoman for SunAmerica Investments, which holds $60 million in mortgage loans to Standard Brands, noted that the lender expects to “come out whole” despite the bankruptcy filing because Standard’s real estate could be sold to other retailers.
The bankruptcy filing follows the collapse two weeks ago of a proposed investment in Standard Brands by New York-based Founders Equity Inc. and a group of affiliated investors. That bailout plan would have injected $12 million into the company and given Founders four seats on Standard’s nine-member board.
At the time, the company said it was continuing to negotiate a financial restructuring with a Los Angeles venture capital firm and its senior debt holders, SunAmerica and Transamerica Life Cos.
Along with the slowdown in consumer spending in recent years, Standard Brands has been hurt by the $150-million cost of a stock repurchase it made after being hit by two takeover bids in 1987. The company also fended off a threatened proxy fight last year by Kansas City investor John Latshaw, a current board member who had sought to unseat the company’s management. During the first three quarters of 1991, the company lost $5.8 million on sales of $202 million.
The bankruptcy filing came after the stock markets closed Tuesday. Standard Brands stock, traded on the New York Stock Exchange, closed Tuesday at $2, up 12.5 cents but far below its 52-week high of $10.
