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Merisel works to go black

After hemmorhaging losses amid declining revenues, Merisel is seeking to extend payment on some debt and restructure terms with other debt holders.

After hemmorhaging losses amid declining revenues, Merisel (MSEL) today said it's seeking to extend final payment on some senior debt and restructure payment terms with another group of debt holders.

Merisel, which distributes computer and networking hardware and software, reported $300 million in debt at the end of 1996 and is looking to minimize that amount in order to return to long-term profitability.

Of that outstanding debt, the Merisel Americas subsidiary wants to extend the maturity date on nearly $160 million of senior debt due in January 1998, said Leslie Sinfield, a spokeswoman. She would not disclose the new maturity date the company is seeking.

Meanwhile, the parent company hopes to reach agreement in the next two weeks with investors who hold its 12.5 percent senior notes that are due in 2004. The company wants to convert the notes' outstanding $125 million in principal into shares of Merisel's common stock.

Analysts and company representatives, however, declined to comment on the likelihood noteholders will go for such an agreement.

Merisel's stock has largely bounced around a 2 per share range for the past six months. The company has a 52-week high of slightly more than 5 a share and a low of around 1-1/2.

Restructuring the notes would free the company of millions in debt payments.

"As we stated last month, Merisel can only achieve long-term profitability if the company's debt levels can be reduced significantly. The conversion of the notes will allow the company to avoid significant amortization payments that would otherwise be required in June 1997 under Merisel Americas' existing obligations," said Dwight A. Steffensen, Merisel chairman and chief executive, in a statement.

Standards & Poor's has the holding company's debt rated at "triple C-minus," which is the lowest rating without being in bankruptcy. The Merisel Americas subsidiary holds debt that is senior to the holding company, which means its noteholders would get paid before those of its parent company should a bankruptcy occur.

Martha Toll-Reed, an S&P fixed income analyst, said companies that can't get its debt holders to agree to restructuring terms often either file for bankruptcy or are forced into such a move by its investors and creditors.

But Sinfield said that "bankruptcy is not necessarily the route. There are other options and I'll leave it at that." Putting the company up for sale is currently not one of the options, she added.

Merisel has posted declining revenues for the last four consecutive quarters. The company generated revenues of $1.15 billion in the fourth quarter ending December 31.

Meanwhile, the company has posted losses for the past couple of years but was able to was able to show its first quarterly profit in some time: $1.7 million in the fourth quarter.

"It's the first sign of a turnaround," Toll-Reed said. "But the fourth quarter is their strongest and they are in a seasonal business. It remains to be seen if they can do this every quarter going forward."