NEW YORK — Merry-Go-Round Enterprises is making a last- ditch effort to avoid a bankruptcy proceeding, according to strong market reports Tuesday.

MGR reportedly is asking its largest vendors and factors for a nine-month moratorium on its trade debts and said it would pay off the arrears, plus interest, on Sept. 1.

MGR denied the reports through a spokeswoman. Michael Sullivan, president and chief executive officer, did not return phone calls. The moratorium is designed to give the teetering retailer breathing room to try to line up a new bank deal. As reported, MGR is in technical default of its current bank line and has been scrambling to line up a new working capital line for the past month.

MGR has reportedly told major creditors that it will set up a $60 million letter-of-credit facility to finance spring shipments to the Joppa, Md.-based company. The chain has been operating with almost no credit since it failed to pay Dec. 10 maturities for merchandise received.

Trade sources said Tuesday they are reviewing the proposal and have made no decisions.

One factoring executive, who asked not to be quoted by name, said he suspected that the deal would be accepted, noting that future shipments would be backed by the company’s cash. MGR is reportedly sitting on close to $100 million in cash.

“There’s nothing to lose,” he said.

Another credit source noted that any deal is better than a Chapter 11 filing. He added that the company has a strong cash position as a result of its not paying November bills.

The sources noted that while the moratorium will help MGR in the short-run, they still have grave concerns about the company’s long-term future.

“I still think they’ll eventually wind up in Chapter 11,” one of the sources said. “Any bank line they might get will probably have a lien on inventory, which will reduce trade credit.” One source said he was skeptical about the moratorium, noting Alexander’s Inc. tried the same ploy prior to liquidating in Chapter 11 proceedings last year.