Staggering under the weight of $2 billion in debts and faced with critical shortages of goods in its stores because suppliers would not give it credit, Wickes Companies Inc. Saturday became the biggest firm to file for bankruptcy in the current recession.
Wickes, which had estimated sales of $4 billion last year, filed a petition for reorganization under Chapter 11 of the federal bankruptcy law, which allows a company to hold off paying its creditors while trying to rearrange its financial affairs.
In another weekend business collapse, Spector-Red Ball Inc. of Dallas, the nation's sixth largest trucking firm last year, closed its general freight operations Friday, eliminating 6,500 jobs nationwide.
Blaming the "general condition of the economy," Emerson Swan, chairman of Spector-Red Ball, said the company stopped picking up freight at 5 p.m. Friday and will deliver on-hand freight this week.
"The depressed economy has reduced the amount of business available," he said. "That has created fare discounting, the same things the airlines are facing.
Wickes, a diversified manufacturer and retailer heavily dependent on the depressed housing industry, blamed its difficulties on the prolonged recession, high interest rates and its massive debt.
The $2 billion debt figure disclosed in the bankruptcy petition was more than double the previously reported total of Wickes' long- and short-term debts. The sum includes about $1 billion owed to trade creditors who supplied goods and services, officials said.
Wickes sought court protection from its creditors after rejecting an offer of new financing from Allegheny Beverage Corp. of Baltimore. Allegheny said a group of banks was prepared to provide as much as $600 million in loans to keep the struggling conglomerate afloat.
Wickes operates businesses in half a dozen different industries and was the largest stockholder of Garfinckel, Brooks Brothers, Miller & Rhoads Inc. of Washington before that company was taken over by Allied Stores last year.
In an interview, Sanford C. Sigoloff, the corporate "rescue artist" who was elected chairman last month as Wickes' problems mushroomed, cited the worsening shortage of goods at company stores as a prime reason for the bankruptcy filing.
"We didn't have goods, and when we didn't have goods we didn't have sales, and when we didn't have sales we didn't have profits," Sigoloff said.
The Wickes chairman said that, based on his experience at Los Angeles-based Daylin Inc., a retailer that he guided through a 1 1/2-year bankruptcy reorganization in the mid-1970s, it may take as long as three years to reorganize Wickes' operations.
In its filing, Wickes excluded from its bankruptcy petition about 10 businesses, including its European operations and its machine tool group. Ironically, Wickes Machine Tool Group was the original company founded in 1854 in Saginaw, Mich., on which the worldwide Wickes operations were built. Also kept out of the bankruptcy case were Wickes' Yorktowne kitchen cabinets subsidiary and its chain of 100 Howard Brothers discount stores in the Southwest.
The other Wickes operations are expected to remain open while the company tries to develop a plan for paying its debts. They include Wickes Lumber, one of the nation's biggest building supply chains; Wickes Furniture, a warehouse supplier similar to Levitz; Aldens mail order company in Chicago, the Red Owl and Snyder supermarket chains and Gamble-Skogmo Inc., operator of several hundred franchised hardware stores throughout the Middle West.
Wickes recently sold the MacGregor Golf Co., but when Sigoloff took over a few weeks ago he canceled plans to sell Aldens, the supermarkets, and a dried bean business in Michigan. Selling the subsidiaries would have brought Wickes badly needed cash, but at the cost of some of its most profitable operations, he said.
In a prepared statement, Sigoloff said that Wickes took the bankruptcy action to "preserve the company's assets and to reverse its seriously deteriorating condition." In recent weeks, Wickes said that it would report losses of "significantly" more than the previously estimated $80 million in the year ended Jan. 31, 1982, adding that losses in the current quarter are also likely to be substantial.
The statement also said that a "review undertaken by new management raised serious questions about the long-term ability of Wickes to survive within the framework of its present structure."
In an interview shortly after the filing, Sigoloff said Wickes' $2 billion debt included its previously reported $580 million in short-term bank loans and another $400 million in debentures and long-term obligations.
"The other billion dollars is if you accumulate all of the income debentures, long-term insurance debentures, trade debt, leases, and on and on," Sigoloff said.
He also cited significant accounting difficulties within the company.
Wickes' previous management, under Chairman E. L. McNeely, who took early retirement last month, and President David J. Primuth, who resigned, had been severely criticized by officials of the firm's 44 creditor banks for what they said were overly optimistic forecasts of sales and profits, as well as significantly inaccurate cash flow estimates.