Emersons, Ltd., filed a bankruptcy petition in Hyattsville late yesterday, but the company emphasized that its 36 restaurants - including 10 in metropolitan Washington - will remain open for normal business.
Negotiations on a new credit agreement with banks, leasing firms and institutional lenders broke down, and the Rockville company initiated court proceedings on a voluntary basis under Chapter XI of the Bankruptcy Act.
In a petition filed with U.S. District Court Judge Glenn J. Goldburn, the federal referee for bankruptcy proceedings at Hyattsville, Emersons asked that the current management be allowed to continue operation of the firm while a plan of financial reorganization is developed with creditors.
According to court documents the assets and liabilities of Emersons are about equal at $16 million, with stockholders' equity listed as a negative of $7,696.
Liabilities detailed yesterday include $9.4 million of current payment due on longer-term debts plus another $2 million of long-term obligations, an allowance for closing unprofitable restaurants of $653,737; accrued expenses of $855,045; accounts payable of $2.8 million; and estimated legal, auditing and other costs of $270,575.
Assets of the firm include $204,166 of accounts receivable; $956,805 in refundable taxes, an inventory of $1.4 million; prepaid expenses of $179,974; equipment improvements valued at nearly $4 million; leashold improvements value at $7.6 million; capitalized leases for equipment and leaseholds value at $3.2 million and other assets of $1.4 million - less depreciation of $2.9 million.
The largest creditor of Emerson is Fidelity Bank of Philadelphia, which is owed $4 million, according to the restaurant firm's lawyer, Allex Kerxton.
Subject to certain conditions and approval of Judge Goldburn, Fidelity has said it will lend additional funds to the current management of Emersons as "debtor-in-possession" while a plan to rehabilitate the firm is developed.
Emersons was founded here late in 1969, when an initial restaurant was opened. The firm featured a limited steak menu with unlimited salads, wine and beer. By last year, the company had explained to 42 restaurants in the Northeast states but the Securities and Exchange Commission alleged that former officers inflated reports on company operations and took kickbacks in exchange for use of specific beers and wines.
Officilas involved in the alleged fraud were removed and a California restaurant executive, Bill Jackson, was brought in last fall as president. He had closed several unprofitable units, including one in Southwest Washington that was sold recently and another in Toledo, Ohio, that was shut down.
Jackson could not be contacted last night but in a prepared statement earlier this week, he said Emersons plans to continue a program of improving good quality and service during a financial reorganization. He expressed optimism that creditors would agree to a plan for paying off debts.
The current cirsis was caused by an absence of available cash and reduced bausiness during the abnormally cold weather, he stated.