NEW YORK — The Leslie Fay Cos. filed for Chapter 11 defalcation aegis on Monday in the deathwatch of a multimillion-dollar accounting fraud.
The accoutrement maker, whose brands accommodate Leslie Fay, Kasper for A.S.L., Castleberry and Nolan Miller, said it filed to assure the amount of its assets and to ensure it had abundant costs to buy t and added appurtenances to accomplish its clothes.
“It was inevitable, because the base of the botheration and the allegations of misconduct,” said Jim Rice, acclaim administrator for Bernard Sands’ Acclaim Consultants in New York.
The aggregation apparent the artifice in backward January aback its controller, Donald Kenia, accepted he had abstract account and underestimated the amount of authoritative clothes as far aback as the 1991 fourth quarter. Kenia, who is allowance with the investigation, was suspended.
“They had to book to get merchandise,” said David Finkelstein, controlling carnality admiral of Century Factors. “The factors capital to apperceive the ambit of the botheration and how abysmal it was. And they didn’t accord satisfactory answers.”
After the filing, Citibank agreed to accommodate Leslie Fay with $100 actor in costs beneath a one-year commitment. Half of the money will be accessible anon with cloister approval. The blow will be accessible afterwards the coffer reviews the company’s banking records.
“While we affliction the accommodation to book a autonomous Chapter 11 petition, today’s activity will accredit us to abide to accomplish our businesses and to assure this company’s admired authorization and actual cogent assets,” said John Pomerantz, Leslie Fay’s administrator and arch executive.
During the accomplished two months, Leslie Fay begin the artifice was added boundless than it aboriginal thought. In February, the aggregation said the “worst case scenario” would clean out accepted profits of about $23.6 million, or $1.25 a share, for the year concluded Jan. 3.
The aggregation afterwards said it expects to column a accident of $13.7 million, or 72 cents a share, for the year. It additionally estimated that 1991 balance were $17 million, or 91 cents a share, beneath than the $29.4 million, or $1.55, appear earlier.
Last month, the aggregation replaced Paul Polishan as arch banking officer. Polishan, who aing Leslie Fay in 1969, is on a leave of absence awaiting the aftereffect of the artifice investigation. The aggregation said it replaced him because its lenders and suppliers absent aplomb in his adeptness to backpack out his job. It says that arch administration was not complex in the fraud.
Leslie Fay’s lath widened its analysis beneath than two weeks ago afterwards a letter beatific anonymously to the aggregation said the accounting irregularities started as aboriginal as 1990. The agenda was beatific by addition claiming to be a above employee.
The aggregation anticipates creditors will balance all of their claims beneath its plan of reorganization. As of Jan. 2, Leslie Fay had about $440 actor in assets and $260 actor in liabilities.
While in defalcation proceedings, Leslie Fay will consolidate its businesses by absorption on its Leslie Fay, Kasper for A.S.L., Next Day Accoutrement and Theo Miles accoutrement lines, said Michael Babcock, admiral and arch operating officer.
So far, the aggregation has absitively to carelessness three businesses: the Albert Nipon artist label, lingerie and the Andrea Gayle dress line. Its added labels accommodate Breckenridge, Joan Leslie, Outlander and Hue hosiery, forth with Nolan Miller and Castleberry.
Todd Slater, an analyst at UBS Securities, said he expects Leslie Fay to appear from Chapter 11 because the aggregation has a able dress business, with about alert the sales aggregate of Liz Claiborne Inc.’s dress business.
Department food “would accept a ample abandoned on their dress floors if Leslie Fay wouldn’t address to them,” Slater said. “There would be abandoned racks.”
Trading on Leslie Fay banal was abeyant briefly on Monday to acquiesce the account to get out. The banal bankrupt at 3 a share, bottomward 1/4 on trading on the New York Banal Exchange.
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