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Reddi Brake Shops Close Amid Creditor Pressure

March 19, 1997|From Bloomberg News

Reddi Brake Corp. said Tuesday that it suspended operations at its 84 auto parts distribution shops after creditors filed to force its operating subsidiary into bankruptcy proceedings.

The Ventura-based company said four unsecured creditors this week filed an involuntary petition against the subsidiary for reorganization under Chapter 11 of the U.S. Bankruptcy Code.

Echlin Inc.'s Brake Parts subsidiary, McQuay-North Inc., Autospecialty and General Automotive Parts Exchange filed their petition in Bankruptcy Court in Santa Barbara, said Reddi Brake Chief Financial Officer Sandford Waddell.

Waddell said he had not discussed the filing with the creditors, but he said it was probably done to protect their claims because they were concerned that Reddi Brake's lender--CIT Financial Corp.'s CIT Group--would foreclose on the company's assets.

Shares of Reddi Brake fell 6 cents to close at 9 cents in Nasdaq trading.

The filing says the creditors are owed $2.1 million, Waddell said. CIT Group is owed about $5 million, he said.

Last month the company said it was in an "informal reorganization" and had reached an agreement with a committee of its major trade creditors that would allow it to return slower-moving inventory for a combination of new fast-moving inventory and credit against its debts.

Reddi Brake said the agreement depended on "certain third-party investments" in the company that were under negotiation.

It also said there was no assurance the investments would be completed.

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