Coleco May Seek Protection From Creditors

WEST HARTFORD, Conn. — Coleco Industries Inc., which has enough funds to carry on business through next Thursday only, could file for protection from its creditors next week, company Chairman Morton E. Handel said Friday.

Handel would not confirm that his struggling company would indeed file for protection under Chapter 11 of the federal bankruptcy code, but he said in a telephone interview that if anything is to happen, it would be next week.

“There really is nothing happening today,” Handel said.

Handel, recuperating at home from open heart surgery, said 12 foreign and domestic lenders owed $103 million by Coleco agreed to provide money to the company through next Thursday.

No Buyers in Sight

On Thursday, the West Hartford toy company gave up on its plan to restructure its debts after having repeatedly extended a deadline for a securities swap by its bondholders.

Coleco has tried to restructure its finances since March, when it proposed exchanging $335 million of bonds for a combination of new bonds and stock. The company said the exchange would save it millions of dollars a year in interest payments and supply cash for the business.

The original exchange terms were rejected by some of the bondholders, who contended that the swap would have reduced the value of their investment without requiring similar sacrifices from Coleco’s stockholders and bankers.

“Unless they can pull a takeover of the company in the next few days, this sounds like the end,” said Sean McGowan, an analyst with the investment firm Balis Zorn Gerard Inc. in New York.

Handel said Coleco had not received any offers to buy the company and was not approached by any prospective buyers. He said other banks are willing to lend Coleco money if it can work out arrangements with existing lenders.

The company’s current banks have provided short-term financing to keep Coleco afloat since June 1.