NEW YORK -- -- United Merchants & Manufacturers has managed to reduce its debt by about $30 million through a novel agreement with its principal secured lender, CIT Group/Commercial Services.
In November 1993, CIT agreed that if UM&M were able to reduce the then outstanding debt of $124 million to $60 million by June 30, 1994, the lender would forgive $30 million of the remaining debt and accept a long-term subordinated income note for the other $30 million. Interest on the note at 5 percent is payable out of income only after UM&M operating profits reach a designated threshold, according to Uzi Ruskin, UM&M's chief executive officer.
Funds to pay down the CIT debt came from the sale of UM&M assets and a new $29 million borrowing from another lender, Foothill Capital of Los Angeles. The new debt is secured by substantially all the assets of the company.
The transaction with CIT will result in a special non-cash gain of about $30 million for UM&M in the year ended June 30, 1994.
UM&M sold its Uniblend yarn division last March and its Clarkesville Mill division in May. It still has a spinning and weaving operation in Buffalo, S.C., which it is trying to sell, and a 48-unit outlet store chain, also up for sale, according to Ruskin.
Once those sales are completed, UM&M's principal asset will be its 79 percent interest in Victoria Creations, designer and manufacturer of costume jewelry under designer brands and private label. In the last reported operating statement covering the quarter ended March 31, Victoria Creations showed an operating profit of $442,000, but a bottom line loss of $100,000. Sales were up 17.5 percent to $10.6 million.