Time is short for Mercury Finance Co.

The subprime auto finance company, once the industry's bellwether, is awash in $904 million of debt and has just over two months to come up with a definitive plan for its future or its creditors could dismantle the business.

Mercury said Thursday that creditors have agreed "not to take action" until March 2, 1998. The company acknowledged that agreement may be terminated after Jan. 10, "in the event Mercury does not have a proposal meeting certain criteria for the structuring, financing, or sale of its business."

Financial analysts said it is time to conclude the company's long ordeal, triggered by a financial crisis last winter that dragged down almost the entire subprime auto-lending sector.

"This company has to decide where it's going, who's in charge, and whether it's going to survive or not," said Peter Shimkus, an analyst at Duff & Phelps Credit Rating Co.

But given the extremely competitive environment such companies face in buying loans issued to people with bad credit, Mr. Shimkus is not optimistic.

"They probably should shut down loan originations, keep their branches open, and collect their outstanding loans because whatever money they have is probably going to be claimed in court," he said. "Unless they change their name and rip out management, they're not a going concern."

The company's auditor, Arthur Andersen, has already questioned Mercury's continued business viability.

Last January Mercury stunned Wall Street by saying it had overstated earnings for several years. The subsequent plunge in its stock wiped out $2 billion in market value as investors fled what had been the industry's best-known and most emulated company.

The Mercury board replaced John Brincat, its chairman and chief executive, though he remains a director. Its controller, James A. Doyle, apparently disappeared a week before the scandal hit, but later turned up with his lawyer for questioning by federal authorities about what was going on at the Lake Forest, Ill., company.

The federal probe continues, and dozens of lawsuits have been filed against the company's management and its former auditor, KPMG Peat Marwick.

On Thursday, Mercury finally released its revised earnings for 1996, 1995, and 1994.

The company reported losing $29 million in 1996, down from an originally reported $120.7 million gain-a difference of $149 million. Its 1995 restated earnings were $74.1 million, down from $98.9 million, while 1994 and 1993 earnings, which the company said were also manipulated when the crisis broke, were basically unchanged.

But some observers say Mercury's disclosure fails to answer several questions needed to end this long saga.

For example, who is responsible for the "accounting irregularities" that caused Mercury to so severely overstate its earnings? The company has blamed Mr. Doyle, who died of an apparent heart attack in June, for doctoring the books.

And what is the company's net worth? The restated earnings will affect the company's shareholder equity, said Mr. Shimkus.

The company has still not yet filed its 1996 annual report, though Joe Kopec, an outside spokesman for Mercury, said it should be ready "in a few weeks at the latest."

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