Interco liquidates Sky City after buyout falls through - Interco Inc., Sky City discount store chain

Discount Store News, Jan 21, 1991

Interco Liquidates Sky City After Buyout Falls Through

ASHVILLE, N.C. -- In a move that was unannounced, cash-starved Interco Inc. is liquidating its Sky City discount store chain.

All remaining units of the 55-store chain will be closed by Jan. 31 and its 1,500 employees will be let go.

Liquidation of Sky City, founded in 1962, comes a month after a planned management-led buyout fell through.

St. Louis-based Interco, formerly International Shoe, declined to comment.

Harvey Yellen, ceo of Sky City, also declined to comment beyond confirming that the chain is being liquidated.

Yellen was leader of an investment group that Interco announced in November had bought the chain for an undisclosed sum. Investors included the Asia Pacific Industries, a global trading firm based in Hong Kong, Interco said.

Then without explanation, Interco announced last month in a one-sentence release that the deal never took place. Neither Interco nor Sky City is saying why the deal fell through.

Since 1988, Interco has been strapped by $1.5 billion debt it took on to fend off a corporate raid. Interco has been unable since at least May 1990 to make the interest payment on that debt, much less support Sky City modernization as it struggled with increased competition from Wal-Mart and Rose's Stores.

Interco borrowed the money to pay a $1.4 billion cash dividend to stockholders and began selling assets to pay down that $1.5 billion bank loan.

It put Sky City on the list of "businesses held for disposition" but was unable to find a buyer, shows an S-4 filing with the Securities and Exchange Commission.

Interco did sell its Central Hardware chain, London Fog and the Ethan Allen furniture chain. It still owns Florsheim and Converse shoes, and The Lane Co. and Broyhill Furniture, as well as Banister Shoe, which operates factory outlet shoe stores.

Earlier this month, Interco notified the SEC that it again is seeking bank approval to skip interest payments due.

As an element of the aborted LBO, Asia Pacific and other investors were to provide enough fresh capital to pay for five new Sky City stores conforming to its new 30,000-square-feet prototype. In addition, the capital infusion would have financed new corporate offices, a warehouse and a distribution center in Ashville.

While opening new prototype stores, the chain would have closed 20 older units.

Sky City store count peaked at 72 in 1987, slipping to 55 at the end. Sales hit $145 million that year but had fallen to $120 million in 1989.

PHOTO : Sky City, Mt. Airy, N.C.: All remaining units of the 55-unit chain will be closed by Jan. 31.