Creditors Seek Takeover For Circle in the Square

With the clock ticking loudly, a committee representing the creditors for the defunct Circle in the Square is looking desperately for a performing arts organization to take over the theater.

The nonprofit theater, which filed for bankruptcy last fall and shut down in mid-June, faces debts of about $3.5 million accumulated before it petitioned for protection under bankruptcy laws and more than $200,000 incurred after the petition. The rapid accumulation of post-petition debt is one of the main reasons that the theater's board voted to suspend operations just before a scheduled meeting in bankruptcy court at which a trustee was to have been named to oversee the theater.

With the fall theater season looming, the creditors' committee is becoming restless. ''We are seeking any responsible, viable, performing arts organization to come forward, so we can effect, in layman's language, a sale,'' said Norman E. Rothstein, a producer and general manager who has been approved by the bankruptcy court as a business consultant to the creditors' committee.

When the theater's closing was announced, Gregory Mosher, the company's producing director, said that he and the executive director, M. Edgar Rosenblum, hoped to assemble a group of ''white knights'' who could bring the theater out of bankruptcy and invest in productions for the fall. The sudden appearance of Wilbur L. Ross Jr., an investment banker, as an adviser to the theater aroused considerable interest in Mr. Mosher's remarks.

Mr. Rothstein cast doubt on that script yesterday, however. Speaking of Mr. Mosher, he said, ''We wish him well, but after 10 months of Chapter 11 reorganization, the committee feels that it is no further along than when it began, and in some respects the situation is worse, because the theater is not just bankrupt but insolvent.''

He continued: ''We are concerned that other arts organizations will be scared off by Wilbur Ross and think, 'Well, they've just closed down for a while and will reopen with the same people.' The old Circle is, sadly, regrettably, closed and defunct.''

The theater's liabilities total about $3.5 million. About $1.8 million of that is a claim by the Internal Revenue Service that is now being mediated. Most of the remaining money is owed to the pension funds of various theatrical labor unions.

The theater's assets are the lease it holds at 50th Street between Broadway and Eighth Avenue, and its name, which dates to 1951, when the theater was founded by Theodore Mann and Jose Quintero as a theater in the round at Sheridan Square in Greenwich Village. The Circle in the Square Theater School, which split off from the theater in 1993, continues to operate independently.

Mr. Rothstein said that a rescue operation putting Mr. Mosher and Mr. Rosenblum back in charge would be met with deep skepticism by the creditors, who were startled, he said, to find that after the financial success of ''Hughie,'' a production that made several hundred thousand dollars for the theater, and substantial ticket sales for ''Stanley,'' the first production under the Mosher-Rosenblum administration, the theater listed more than $200,000 in administrative debt, an amount that Mr. Rothstein said his committee believed might be closer to $300,000 now.

''Were we to cut a deal with them, could they manage to keep it?'' asked Mr. Rothstein, referring to Mr. Mosher, Mr. Rosenblum and the previous board.

Mr. Mosher said that he had been talking to people interested in rescuing the theater but declined to discuss specifics. He defended the financial record of his administration. ''I feel completely confident that everything we did in the maintenance of 'Stanley' was responsible and frugal,'' he said. ''We were running a theater and preparing a season in the most frugal, not-for-profit way you could imagine. Our ongoing expenses were no secret to the committee.''

Mr. Mosher, referring to himself as ''a private citizen,'' said that he would be happy to see someone else running the theater. ''I believe that there is enough of an audience, artistry and cash to make Circle in the Square a thriving institution, once you get past the I.R.S. claim and the debt.''