Originally created 12/28/96

Marvel files for protection



NEW YORK - Spider-Man and Captain America are a powerful duo, but even they couldn't save parent Marvel Entertainment Group from the clutches of bankruptcy court.

The nation's largest comic book purveyor, also the No. 1 producer of trading cards, succumbed Friday and filed for Chapter 11 protection from creditors in Delaware, where it is incorporated. The underlying trouble is that collectors who bought with abandon in the late 1980s and early '90s have lost their appetite for comics and cards.

Further complicating the plot, which has more twists than a Spider-Man serial, is a web of intrigue pitting Marvel owner Ronald Perelman against bondholder Carl Icahn, both renowned takeover artists.

Marvel was once a stock-market superhero that made big money for investors. Adjusted for stock splits, the price climbed 16-fold past $34 about 2« years after it was sold to the public in 1991.

The stock closed at $2.37« on Thursday, down 12« cents. Marvel trading was halted Friday on the New York Stock Exchange following the bankruptcy news.

"It's been pretty disappointing," said Alexander Paris Jr., senior investment analyst at Barrington Research Associates Inc. in Chicago. "The Marvel brand has a lot of intangible value."

So far, Mr. Perelman, who owns about 81 percent of Marvel through his Andrews Group and other companies, has been doing everything in his power to keep the company. Touching off the bankruptcy filing was the unwillingness of creditors, including Mr. Icahn, to accept a Perelman restructuring plan.

Under that plan, Mr. Perelman would have spent $350 million for about 80 percent of new Marvel shares. Mr. Perelman then would have merged Marvel with another company, Toy Biz Inc., which has enough cash flow and assets to shore up Marvel's finances.

Mr. Icahn rejected Mr. Perelman's plan, saying it would give Mr. Perelman control of the company for a fraction of its value. Mr. Icahn suggested instead a $350 million takeover of the company by himself and other bondholders.

Now, the U.S. bankruptcy court will have to sort it out.

"We would have preferred to recapitalize Marvel without having to seek the aid of the court, but the actions and positions taken by the bondholders prevented that approach," Scott Sassa, chairman and chief executive of Marvel, said in a statement.

Icahn responded with a statement of his own, calling the bankruptcy court filing "unconscionable."

"It is patently clear that Ron Perelman has adopted this course to realize a windfall profit for himself at the expense of those to whom he owes a fiduciary responsibility," Icahn said.

Andrews responded by characterizing Icahn's position as "disingenuous."

The bankruptcy of Marvel is part takeover battle, part entertainment-industry story. Icahn, who invests in the debt of distressed companies, has enjoyed his share of successes. So has Perelman.

Marvel Entertainment Group Inc.'s comic and trading card businesses, however, are struggling. That has caused real problems for Marvel, which were exacerbated by acquisitions that piled on debt.

In its filing, Marvel Entertainment, which is based in New York, listed assets of $229.6 million and liabilities of $693.2 million.

Marvel titles like Spider-Man, Captain America, X-Men and the Fantastic Four haven't enjoyed success like they once did because of the cooling collectors market for comics. New competitors cropped up during the boom years through 1993, many started by successful artists leaving companies like Marvel.

Also, companies like Marvel started putting out new comic titles at breakneck speed. "They flooded the market and made it kind of confusing," said Paris.

Marvel also has been hurt by a decline in the market for baseball, football and other sports cards after acquiring the makers of Fleer and SkyBox trading cards a few years ago. Sports industry labor troubles didn't help the popularity of player cards.

So at the same time, both faddish businesses turned South. Whether they can regain their luster isn't clear.

Marvel, though, plans to invest in and expand both businesses through its bankruptcy reorganization plan, which includes $160 million in borrowed funds from Chase Manhattan Bank and Marvel's other lenders.

"Marvel's strategic investment program includes Marvel Studios' development of television and film properties, Marvel Mania theme restaurants, Marvel Interactive software and Fleer/SkyBox trading card initiatives," Sassa said.