Creditors of Mercury Finance Co. have agreed to an amended plan in which they will become majority owners of the embattled company, Mercury announced Tuesday.

The plan, to be submitted to a bankruptcy judge Monday, calls for the creditors to get a 95% equity stake in the Chicago auto loan company and secured notes worth 75% of their claims against it.

The key change in the new agreement would provide $5 million to settle claims by shareholders against Mercury. An initial proposal by Mercury offered those shareholders more stock.

Mercury said it expects the new agreement to be approved during a confirmation hearing in February.

If it is approved by the court, said William A. Brandt Jr., president and chief executive of Mercury, the plan "will relieve the company of the burdens of its present debt structure and will allow current shareholders to get some limited recovery on their investment."

Calls to Mercury and David S. Kurtz, an attorney for Mercury creditors, were not returned. Mercury said it is still being investigated by the Securities and Exchange Commission and the Federal Bureau of Investigation for alleged accounting irregularities.

Mercury reported after-tax losses of $20 million on sales of $186 million through the first three quarters of 1998 and had liabilities of $737 million in October, according to a filing with the SEC. At least part of the liability total is a $50 million credit line syndicated by BankAmerica Corp. in February 1997.

In early 1998, lenders holding $644 million of Mercury's debt agreed to forbearance. This agreement expired July 15.

Mercury sought protection from creditors in May under Chapter 11 of the U.S. Bankruptcy Code, the culmination of a long descent from the top of the subprime lending business.

The firm's downfall began in January 1997, when it disclosed that its profits for previous years had been wildly overstated. At the time the firm was valued at $2 billion in the market. In May, when its shares were last traded, the firm was valued at $9.78 million.

Mercury's fall stung several big investors, especially mutual funds and private investment firms including Franklin Mutual Shares, Silver Oak Capital, and even one Wall Street firm, Goldman, Sachs & Co.

Along with other shareholders, those firms are to divide the remaining 5% stake in the company and be given warrants to buy an additional 17.4% of the new stock.

The $50 million loan to Mercury was made after a failed syndication for $750 million by Salomon Brothers Inc. in January 1997.

Salomon had touted the loan as the first interim financing by an investment bank for an investment-grade borrower. The loan initially was going to be used to buy Fidelity Acceptance Corp. from BankBoston Corp., but BankBoston pulled out of the deal.

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