There could be bad news for all of you who cannot imagine writing without a Magic Marker. The parent company of the marker maker has filed for reorganization under Chapter 11 of the federal bankruptcy laws.
That does not necessarily mean they are going out of business. But the company, Magic Marker Corp. of Cherry hill, N.J., has filed the suit to forestall a major creditor from seizing the stock of its wholly owned subsidiary, Magic Marker of Delaware Inc. The latter Company actually makes the famous Magic Marker pens.
Teachers Insurance and Annuity Association informed Magic Marker by letter Monday that it intended calling in loans to the parent company valued at $3.6 million because of unpaid interest on the loans. The stock of the manufacturing company, Magic Marker of Delaware, is the collateral of the loans.
A company spokesman for Magic Marker Corp. said Tuesday, when the Chapter 11 petition was filed, that the company was taking the action order to protect its interest in Magic Marker of Delaware.
The company has a history of financial and legal trouble. And although the president, Ira Ingerman, said yesterday that he is hoping that Teachers will reverse its decision, a spokesman for Teachers commented that "Teachers Insurance does not want to continue lending to the company with its managment as it's presently constituted."
Gary Rugendorf, special loan administrator for the creditors, said he did not wish to comment specifically on Ingerman's management. He said that Teachers primarily was concerned about the financial position of Magic Marker.
The company has not yet released earnings for the year ended in January 1980, and Ingerman said these accounts were now being prepared. However, it has not made a profit since 1974. Losses in the year ended January 1979 totaled $683,000 on sales of $19.5 million.
Rugendorf commented yesterday that the company was "not doing well." He said that Teachers had been thinking about taking action to reclaim its money for some time.Magic Marker Corp. missed an interest payment last Novemeber and since has missed further quarterly interest payments.
Magic Marker's legal troubles began in 1977 when 22 people, including Ingerman, were indicted by a federal grand jury on charges relating to the manipulation of the price of Magic Marker stock back in 1971 and 1972. In February 1978 the government dropped the charges against Ingerman. He agreed to testify against the other defendants and pleaded guilty to filing a false tax return in 1972.
Guilty or no-contest pleas were entered by 21 defendants. Two of them, Yiddly Bloom and Jack Silbiger of Miami, received one-year jail sentences later in the spring of 1978, and the others were fined and given probationary sentences.
Magic Marker took out the loan from Teachers in 1972 on a 15-year term; thus, if the interest payments had been kept up to date. Teachers would have been locked into the company for another seven years. The loan was made to repay other outstanding unsecured debts. A pledge agreement of 1977 made the assets of Magic Marker of Delaware, the operating company, collateral for the Teachers loan.
Ingerman commented yesterday that he did not know why Teachers had called in the loan. He referred to a company statement on Tuesday that the "action by Teachers was both surprising and particularly regrettable because the company had just received tentative approval of an informal reorganization of Magic Marker of Delaware's indebtedness from that company's lender and had offered to repay Teachers for its indebtedness an amount in excess of the value of its collateral."
Rugendorf said "we wanted something different. The offer was not sufficient at the present time." He said Ingerman had offered $250,000 in cash and some notes to replace those now held by Teachers. He added, "Of course they can always make an offer that will buy us out."
Magic Marker has bought time through filing the Chapter 11 suit. Its 400 employes in Cherry Hill still are working, and Ingerman said the company's bank is continuing to finance it while the company seeks to reorganize financially and to reach a settlement with Teachers.
As Rugendorf commented, the bankruptcy proceedings which protect Magic Marker from its creditors "could be very quick or could take forever."
Only after they are over, will we know for sure whether to say good-bye to Magic Markers.