MBI Business Centers Inc., which once claimed to be the largest and most profitable computer chain on the East Coast but ran into severe financial problems, announced plans yesterday to go out of business.
The Rockville company, which has been operating under Chapter 11 bankruptcy protection for three months, asked the U.S. bankruptcy court to allow it to liquidate under Chapter 7 of the federal bankruptcy laws, citing continuing losses in the third quarter of $3.6 million.
"Everybody had been of the opinion that with hard work and a lot of effort, some miraculous things would happen," Ralph Wagner, MBI's acting chief executive, said of the company's unsuccessful attempt to regroup under Chapter 11 protection. "But finally the accumulation of evidence convinced us that it just wasn't possible."
Wagner, a director of the company, became acting chief executive last week when Ronald Watkins, who had been chairman for the past year, left the company following a disagreement with the board. Watkins said in an interview that he opposed liquidation.
Under liquidation, a bankrupt company's assets are sold and the proceeds used to repay creditors.
MBI's efforts to reorganize under Chapter 11 of the bankruptcy code were frustrated by the General Services Administration's decision a month ago to cancel MBI's multimillion-dollar contract to run three computer stores for the federal government. The loss of the contract -- which accounted for $2.6 million, or 13 percent, of the company's revenue in the second quarter -- and the continuing deterioriation of the company's financial position made it impossible for MBI officials to go through with plans to sell the company, Wagner said.
"We have looked for buyers, talked to buyers, cajoled buyers and visited buyers," Wagner said. "But no one was willing to raise their hand."
MBI rode the crest of the computer boom during the early 1980s to grow from a tiny company to a 34-store chain in slightly more than three years. But last June, as losses mounted due to inventory mismanagement and problems with the GSA contract, the company shut down 12 of those stores.
MBI's remaining 194 employes were laid off yesterday, with the exception of a core staff that company officials said would be retained until the liquidation is completed. No timetable was given for the liquidation.