Cash-strapped Standard Brands files Chapter 11.

Paint company will propose $17 million bailout plan

Standard Brands Paint Co., which hasn't shown a profit for the past year, filed a Chapter 11 bankruptcy petition last week.

Chairman and Chief Executive Officer Stuart Buchalter said Standard Brands was forced to seek bankruptcy court protection after it was unable to reach agreements with its lenders and potential investors. Struggling Standard Brands recently tried to raise $12 million, half from New York-based Founders Equity Inc. investment house and half from a related stock offering, but the plan fell through.

The company filed Chapter 11 with assets of about $280 million and liabilities of $185 million. Business will continue "as usual" in the retailer's stores, Buchalter said.

Torrance-based Standard Brands is a manufacturer, distributor and retailer of paint. The company operates 135 stores.

The company has posted four consecutive losing quarters, most recently $3.1 million in red ink on revenues of $64.5 million in three months ended Oct. 27. During that quarter same-store sales were off 18.9 percent.

Meanwhile, the company's stock has plummeted. Two years ago the retailer's stock traded for $19.37 a share, but prior to the bankruptcy filing it was down to trading at $2 a share.

The bankruptcy filing was made inevitable by the recessionary climate in Southern California, the unwillingness of the company's suppliers to provide it with goods, and the company's inability to meet its debt payments, Buchalter said.

Standard Brands officials have arranged for a proposed $17 million in debtor-in-possession financing, the type of financing required by companies in bankruptcy, and will present the proposal in bankruptcy court, he said.

The $17 million will be used to stock the company's stores with inventory, which was depleted over the past several months preceding the bankruptcy, he added.

Current invoices for goods and services will be paid with the help of this credit line, said Chief Operating Officer Carl Bellini.

"The company will now be able to return to its core paint business and reorganize its finances," Bellini said. "Standard Brands is in business to stay.

"Customers should anticipate that their deposits will be honored and credit cards welcomed," he continued. "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."

Bellini also told the company's 2,100 employees to expect that their pensions, tax-deferred savings accounts, salaries and health benefits will be intact and unaffected by the filing.

Standard Brands' major creditors are Los Angeles-based Security Pacific National Bank, subsidiaries of West Los Angeles-based insurer Broad Inc. and downtown Los Angeles-based insurer Transamerica Occidental Life.

The retailer's bleak picture had already been painted during a three-way brawl involving management, employees and shareholders at the retailer's annual meeting last November. Questions fired at management by attendees included "How long can you continue to stay in business if you lose money quarter after quarter?" and "Isn't it time to look for new management?"

Executive compensation was one issue employee shareholders representatives complained about at the meeting. Between 1989 and 1990, Buchalter's total compensation (salary plus bonuses) rose 10.4 percent, while President Eric Beck's total compensation grew by 28 percent, said Norm Bell, a spokesman for the Employee Ownership Committee, representing Standard Brands' employee shareholders.

Another bone of contention discussed at the meeting was the issue of a union contract, which many Standard Brands employees went without for most of 1991. A five-year contract between Standard Brands management and the United Food and Commercial Workers union was finally ratified in December.