INTERCO FILES FOR CHAPTER 11; JUDGE APPROVES REFINANCING; FLORSHEIM RELEASES CHECKS

CAPE GIRARDEAU - Workers at area Florsheim operations had to wait an extra day to pick up their Friday payroll checks.

The checks were delayed due to financial troubles of Florsheim's parent company - Interco, which is headquartered in St. Louis. On Friday, Interco filed for protection from creditors under Chapter 11 of the federal bankruptcy code.

A U.S. bankruptcy judge in St. Louis issued an emergency court ruling late Friday, approving a financing plan that would permit the company to pay its employees. The judge stopped creditors from seizing Interco's assets.

That cleared the way for the local plants to issue the payroll checks Saturday.

All Cape Florsheim companies were affected, including the shoe plant at 1600 S. West End Blvd., the sole leather plant on Nash Road, and the factory store in the Town Plaza. The Cape shoe plant employs about 450 workers, with an additional 185 employees at the sole leather plant. Also affected was the Florsheim plant in Anna, Ill.

Interco chairman and chief executive officer Richard B. Loynd, said in a prepared statement: "(This) will enable Interco and its operating companies to conduct their business as usual while the terms of the restructuring plan are finalized under the supervision of the court."

The court-approved financing plan has been arranged with 14 banking institutions. A company spokesman in St. Louis said Saturday that the plan would provide $185 million in working capital and a letter of credit financing.

He explained that the company had filed voluntary petitions seeking reorganization under Chapter 11. "One of the first things that happens when a company files Chapter 11 is that all assets are frozen," the spokesman said.

Interco, said that, during the past several weeks, intensive discussions had been held with steering committees for its banks, medium-term note holders and subordinate debenture holders to finalize an agreement for a revised plan for the restructuring of the company's burdensome debt.

"Interco's debt is much larger than it can support," said Loynd. "Financial restructuring is absolutely essential to the long-term health of Interco and its core companies."

The core companies include Florsheim Shoe Company, Chicago; Broyhill Furniture Industries Inc., Lenoir, North Carolina; The Lane Company Inc., Altavista, Va.; Converse Inc., North Reading, Mass.

Also included in the Chapter 11 filing, which was made in the U.S. Bankruptcy Court for the Eastern District of Missouri, were Interco's non-core businesses: Abe Schrader Corp., New York; Magastar Apparel Group, Paramus, N.J.; Senack Shoes Inc., St. Louis; and Sky City Stores Inc., Ashville, N.C.

"Importantly, this expression of confidence in Interco's future ensures that suppliers of Interco and its operating companies will be paid for all future products and services," Loynd pointed out. "The financing also ensures that our customers will continue to be supplied on a timely basis, with business continuing as usual."

The executive also noted that, with court approval, employees of Interco and all of its operating companies would be paid and employee benefit plans will be continued.

Interco owes about $2.4 billion to banks, bondholders and others. The company employs some 23,000 people worldwide, and operates 42 U.S. plants. The company has been fighting substantial debt since fending off a pair of corporate raiders in 1988.