A new management team is in place today at Coleco Industries Inc., and the company that brought Cabbage Patch Kids to the marketplace is seeking protection from its creditors in bankruptcy court. The West Hartford-based company on Tuesday gave up a months-long battle to reach an agreement to reorganize its debts with its banks and bondholders, announcing it had filed for federal bankruptcy court protection from creditors. Coleco said it filed for Chapter 11 protection late Monday with U.S. Bankruptcy Court for the Southern District of New York. The filing will permit the company to continue operating while it reorganizes its finances. The Coleco board appointed J. Brian Clarke, currently president and chief operating officer, as president and chief executive officer. Clarke replaces Morton E. Handel, who is recovering from open-heart surgery. Handel submitted his resignation as chief executive officer because of the company's need for a full-time CEO during this period. He will continue as chairman of the board. The Chapter 11 filing had been expected ever since Coleco announced in March it suffered a $105.4 million loss for all of 1987 and would miss an April interest payment on its debentures. Coleco said the filing did not include the company's Canadian and other foreign subsidiaries. Telephone calls seeking comment from company officials on Tuesday were not returned. Coleco owes more than $100 million to a group of foreign and domestic lenders. In March, shortly after it announced a $47.4 million loss for the first quarter, the toymaker proposed a $335 million debt restructuring plan. But late last month, Coleco was forced to abandon the plan because it failed to win approval of the company's debtholders. The company said Tuesday it was no longer able to obtain working capital financing because of the failed plan and because some creditors had started to attach its assets. Over the past year, the toymaker slashed its work force in an effort to cut costs. It currently has fewer than 600 employees in the United States, down from an average of 2,500 last year. It also has sold several of its product lines to raise cash. ``What is going to emerge is going will be very different from what went in,'' said analyst David Leibowitz, senior vice president of American Securities Corp. Five years ago, Coleco was on top of the toy world with its Cabbage Patch Kids. The company sold $1 billion worth of the dolls over two years. The Cabbage Patch craze prompted Coleco to expand its product lines and make acquisitions. Coleco bought the company that makes Scrabble board games, acquired the license to the popular Trivial Pursuit board game and bought the company that makes Wrinkles stuffed animals. But the Cabbage Patch fad abated and analysts said the company did not pare its costs soon enough. When the toy industry slumped in 1987, Coleco was hit particularly hard. The company suffered losses in four of the past five years, including $215 million over the last two years. It recently lost the license to market Trivial Pursuit because of its precarious financial state. But Coleco said Tuesday it managed to retain the license for the valuable Cabbage Patch line. Coleco said it had extended its license with Original Appalachian Artworks Inc. until Dec. 31, 1994.
