Store keeper.

• Author: Mildenberg, David
• Position: Brendle's Stores Inc.

Doug Brendle held on to his chain as it tottered on the brink of bankruptcy. How it got there, he says, wasn't his fault.

Have you ever opened a door and seen pitch black, and you know you're going to take a step, but you don't know where you're going to land?" Doug Brendle asks. "So the tension rises, and you take the dip not knowing where you're going to fall. And every time you ask the person at your elbow, they don't know either. Or if they know, they don't want to tell you.

"That's kind of the way it is."

He's talking about the Chapter 11 bankruptcy reorganization of the Elkin-based retailer his granddaddy got going. Scrambling to stay alive while the government holds hungry creditors at bay is a subject in which he's gained much expertise the past 20 months. For decades Brendle's was a success story. The Elkin country store grew into a chain of 13 catalog stores by 1982. Four years later, there were 31, selling jewelry and brand-name sporting goods, electronics and housewares at discount prices. In 1991, there were 57 in five states.

Five years earlier, on May 21, 1986, Brendle's had sold $35 million of stock to more than 1,000 investors in the largest initial public offering in North Carolina history. Doug Brendle controlled shares valued at more than $33 million. Things were flush: Doug Brendle took to calling himself Sammy Jr., putting himself in the same league with Sam Walton.

But building a major chain is a very different challenge from expanding a string of stores. Though he won't admit it, preferring to lay the blame on those he hired, Brendle botched turning a family business into a big company run by a new generation of professional managers. In late 1992, with its cash dwindling, management in disarray, the banks clamoring over debts that topped $50 million and shares dropping into the penny-stock realm, suppliers slowed down shipments of goods needed for the critical Christmas season. Doug Brendle was recovering from triple-bypass surgery earlier in the year. In November, Brendle's filed for protection from its creditors in U.S. District Court in Greensboro.

In theory, a Chapter 11 is supposed to give a company space to breathe while it figures out how to fix what's broken or close up shop. In reality, it often turns into a feeding frenzy of lawyers, accountants, consultants and bottom fishers ravaging the carcasses of failed businesses. "I don't know how [Brendle's] has reorganized with these expenses," Judge James Wolfe said at a March hearing, referring to estimates that fees in the case will reach $3 million. "I just don't know how they stay in business."

Even Doug Brendle complains about the price of protection. "You're always at the mercy of the legal system and the accounting system," Brendle gripes. "Too many people really try to take advantage of the process." But he knows as well as anyone that the trick is to make the system work for you. On that measure, he deserves master status, having emerged from bankruptcy driving virtually the same car he ran into the ditch.

The process that Doug Brendle finds so distressing is now complete, leaving him in charge of a retail chain pared back to 30 stores, about where it was when he took it public at $17.75 a share. He's making a $199,992 salary; he remains CEO and a director. Under a reorganization plan approved by the company's three banks and creditors who were owed $106 million when the case was filed, Brendle and other shareholders hang on to 65% of the stock, which was trading at about $1.50 a share in late April. His stake is still worth $3 million.

On April 29, the banks and other creditors received 52 cents on the dollar, plus new stock equaling 35% of shares outstanding. In the upside-down world of bankruptcy, getting 52 cents on the dollar -- plus stock to boot -- is outstanding. "You're going to be hard-pressed to find something like this in the entire country," says R. Bradford Leggett, Brendle's Inc.'s lawyer. "This case is a model of how the Chapter 11 rehabilitation process should work." With $31 million in cash and a $45 million, five-year, prime-plus-1.44% loan from Foothill Capital Corp. of California, Brendle's escaped from Chapter 11 in 17 months. "We believe that this is a record for a company our size," Brendle says.

Now...