NEW YORK -- Cherokee Inc. may be headed for Chapter 11 again in a new restructuring plan, Cary Cooper, the company's chief financial officer, said Wednesday.
The firm has been talking with bondholders and is close to a plan to restructure, he said in a telephone interview.
In the interview, Cooper and Skip Victor, executive vice president of Chanin & Co., an investment banking firm Cherokee hired as an adviser, discussed Cherokee's financial condition and its anticipated inability to meet a Nov. 1 interest payment. In response to a question about whether the interest payment would be made if the company restructured, Cooper said, "The great likelihood is that the restructure plan itself will result in a Chapter 11 filing."
As reported, Cherokee said in a 10-K filing with the Securities and Exchange Commission that it may not be able to meet the interest payment on about $75 million in notes.
Victor noted that an informal committee of bondholders, which holds the majority of the bonds in Cherokee, has been meeting since the end of June.
"They believe Cherokee's capital structure right now is not the right capital structure," and are developing a plan to "convert substantially all of the debt into new equity," he said. The majority of the bondholders are sophisticated financial institutions, not individual retail accounts, Victor said.
Victor added he hopes to move quickly to "successfully restructure Cherokee by the end of the fall, certainly by the end of this year."
Cooper said Cherokee has had "an excellent report from retailers" on the performance of its back-to-school line. "We're quite optimistic going forward in the apparel business."
He added that delivery problems, which hurt sales and resulted in cancellations of orders in June, July and August, are almost over.
Cherokee emerged from Chapter 11 proceedings on June 1, 1993, but has had financial difficulties since then. In the fiscal year ended May 28, 1994, the firm had a net loss of $24.8 million and sales of $114.1 million.
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