Toy and sporting goods maker SLM International Inc. may be forced into bankruptcy before it can raise cash by selling its Buddy L Inc. toy subsidiary. SLM said March 6 that it will fight a petition for bankruptcy that was filed by creditors after SLM agreed to sell Buddy L. A group of senior noteholders filed petitions with bankruptcy courts in Delaware and Montreal to place the company and its subsidiaries into involuntary reorganization proceedings.
On Jan. 23, New York-based SLM said it had signed a letter of intent to sell certain assets of Buddy L to Empire of Carolina Inc. of Delray Beach, Fla.
On March 2, Buddy L had filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code ``to facilitate the reorganization and eventual sale of the toy business, by reducing the liabilities of this subsidiary.'' SLM and Empire then announced an agreement for the sale of Buddy L, subject to due diligence and bankruptcy court approval.
A securities analyst said the rapid pace of events and lack of information precluded him from predicting the outcome of the sale agreement and bankruptcy proceedings.
``Until the smoke settles and there is a steadier flow of financial information, SLM [share prices] will remain under pressure,'' said David Leibowitz of Burnham Securities Inc. of New York.
SLM shares on Nasdaq closed March 6 at $2.87, down 25 cents. Shares traded as high as $30 in November 1993 when Buddy L said it had technology to charge dead alkaline batteries - a process that did not pan out.
In a news release, SLM said the creditors' petitions against the company ``were filed improperly and in bad faith. [SLM] intends to vigorously seek the dismissal of these petitions.''
SLM and Empire officials did not return telephone calls last week.
Buddy L was trying to get expedited treatment under the bankruptcy code to speed up the sale to Empire. Buddy L recently cut 150 positions at its Gloversville, N.Y., facility.
