THE VINDICATOR, YOUNGSTOWN
Top officials met with local employees Monday.
By CYNTHIA VINARSKY
VINDICATOR BUSINESS WRITER
YOUNGSTOWN -- Phar-Mor executives will be spending the next few weeks evaluating the company's stores around the country to determine which will be shuttered to help make the chain profitable again.
The discount drugstore retailer filed for Chapter 11 bankruptcy protection in U.S. Bankruptcy Court here Monday with a promise to "quickly emerge" and to maintain a strong regional presence in its core markets of operation.
Company officials said they will close 65 of its less-profitable stores -- about half the total. Atty. Michael Gallo, the company's legal counsel, said the next step is determining which ones will go.
Youngstown and the Mahoning Valley is one of the chain's core markets and none of the nine area stores are expected to close. "Of course, that could change," Gallo cautioned. "Nothing is written in stone at this point."
Employees: John Ficarro, senior vice president, said managers were meeting Monday with the chain's 1,200 local employees, including about 300 at its Tamco distribution center in Austintown.
"We want to make sure they feel as comfortable as they can be in this situation," he said.
No decisions have been made on staffing changes at Tamco or the headquarters in Youngstown, which employs more than 200.
The company intends to focus on its core markets in Ohio, Pennsylvania, Virginia and North Carolina, where 65 percent of its stores are located, Ficarro said. The chain has stores in 24 states.
He said it is possible, however, that a small number of stores in those areas could be closed or some could be kept that are outside those states.
Liquor: Judge William T. Bodoh gave the company permission, at a preliminary hearing Monday, to pay employee wages earned prior to the bankruptcy filing and to pay liquor vendors, overruling the objections of the U.S. Trustees office.
Atty. Amy Good, representing the Trustees Office, argued that the company failed to show that payment of the liquor vendors constitutes an emergency.
Judge Bodoh noted that Phar-Mor could lose its liquor license if the liquor vendors were not paid, a development that he agreed would negatively affect its ability to revive the business. He gave the retailer permission to pay only for liquor that has already been delivered to its stores.
Executives: Good said the trustees office also objected to pre-petition salary payments to four top Phar-Mor executives, including David Schwartz, Phar-Mor president, who are owed more than $4,300 apiece.
The judge accepted Phar-Mor's argument that the top management employees should be paid so the retailer can keep its management team together and assure continuity.
Gallo said Phar-Mor suffered a "mass exodus" of managers the first time it filed for Chapter 11 protection in 1992 and had to spend more than $18 million to assemble a new management team.
Court records indicate Phar-Mor has assets of $345 million and debts of $300 million.
Phar-Mor said its principal lender, Fleet Retail Finance, has agreed to lend it $135 million for the company's reorganization. Officials said they spent about a month negotiating the deal with Fleet, and it was the best of proposals submitted by three lenders.
Stock: Nasdaq halted trading of Phar-Mor stock Monday morning when company officials notified market managers of the company's intention to seek bankruptcy protection. The stock, which trades under the symbol PMOR, was selling at 56 cents a share before trading was stopped.
Ficarro said that he didn't know when trading would resume but added that he expected the stock to be delisted from Nasdaq by the end of October because of the bankruptcy filing and the low price. The stock would be traded over the counter.
Phar-Mor has not disclosed how many employees will lose their jobs under the reorganization. With stores operating under the names Phar-Mor, Pharmhouse and The Rx Place, the company has 6,125 employees.
The company had 25,000 employees and more than 300 stores in 33 states the first time it filed for Chapter 11 protection in August, 1992. It emerged in September 1995.
The company said there will be no changes in pricing, merchandise or hours at the stores that will remain open.