| Imperial Sugar Co. filed for bankruptcy Tuesday as part of a
deal with lenders that essentially wipes out $250 million worth of debt.
The news was received by officials at local subsidiary Savannah Foods
and Industries with a renewed hope that a healthy parent company will
eventually dig itself out from under an avalanche of money trouble.
"I think its a very constructive move," said Benjamin Oxnard
Jr., president of Savannah Foods. "I'm very bullish on it."
Recently, Savannah Foods has been a lonely highlight on otherwise
depressing Imperial financial statements. During fiscal year 2000,
Imperial lost $34.6 million. This was the third year of losses and during
this period, company officials said it was Savannah Foods that kept
Imperial going.
As part of the proposed reorganization, $250 million worth of bonds are
being converted into stock. On Dec. 15, Imperial announced it could not
make a scheduled $12.2 million interest payment on these bonds. The
company still owes $456.4 million to various lending institutions.
By trimming its debt, Oxnard said, Imperial got the cash it needed to
continue paying bills and salaries. There had been serious concerns,
expressed by both company and Wall Street officials, about whether
Imperial could stay in business without some type of financial
restructuring.
Though no layoffs were planned as of Tuesday's filing, neither Oxnard
nor Imperial officials at company headquarters in Sugarland, Texas could
guarantee that all employees will make it through restructuring. For now,
though, Oxnard said it's business as usual for Savannah Foods.
Oxnard said Imperial's management team will most likely remain intact
during the reorganization and after. The company's board of directors,
though, is expected to change.
During the reorganization period, benefit and pension plans will not be
altered, Oxnard said. Money for these plans is held in a secure trust
fund. The company is stopping its matching contributions to the 401k
retirement plans of Savannah Foods employees.
The retirement and salary continuation plan of top Imperial executives,
though, remains intact. For example, if approved by Imperial's board,
James C. Kempner, Imperial's president and chief executive, stands to take
home a lump-sum payment of $1.5 million on top of his regular retirement
pay if he decides to retire at age 62, according to Securities and
Exchange Commission documents. Kempner is 61.
Tuesday's announcement stemmed from negotiations with bond holders and
major lenders during a 30-day grace period that expired Sunday. Turning
the $250 million worth of bonds into stock erases $25 million worth of
interest payments due each year - something Oxnard says should greatly
help Imperial pay its bills.
Imperial officials described the Chapter 11 bankruptcy proceeding as a
pre-negotiated filing. This means that, before appearing in bankruptcy
court, Imperial officials met with creditors who invested huge amounts of
money in the company and worked out a reorganization plan. Company
officials say they'll have a plan in place by Sept. 30 - the end of
Imperial's fiscal year 2001.
Such an arrangement will likely mean that Imperial works its way
through the bankruptcy process relatively quickly, said Jan Jankowski,
associate dean of the Savannah State University College of Business.
"A lot of times there's a lot of animosity between creditors and
company officials," said Jankowski, also an attorney and inactive
Chapter 7 bankruptcy trustee for the U.S. Bankruptcy Court.
Whatever the outcome, Imperial stockholders are already the big losers.
In exchange for their current Imperial shares, they will receive a 2
percent stake in the reorganized company and warrants letting them
purchase up to 10 percent more during the next seven years.
In situations like this, when a publicly traded company files for
bankruptcy, the stockholders typically take the hardest hit, said Richard
E. McAllaster, president of McAllaster & Associates, a Skidaway
Island-based brokerage.
"You're going from 100 percent stock ownership to 2 percent,"
McAllaster said.
Imperial's troubles started while pursuing an aggressive acquisition
strategy. Instead of swallowing companies such as Savannah Foods, though,
Imperial choked on the massive amounts of debt racked up as a result of
this business plan.
Ever since Savannah Foods shareholders made Imperial's acquisition
official, on Dec. 19, 1997, the company's stock price has slid. Dec. 22,
Imperial's stock closed at $12.31 and started a steady three-year slide
from there, finishing with a value of less than $1.
While Oxnard says Chapter 11 for Imperial should result in a stronger
company, this is little solace to those holding shares of Imperial stock.
A company would have to perform amazingly well, almost at unheard of
levels, for its stockholders to recoup their investments following a
bankruptcy filing, McAllaster said.
"I really don't know of any situation where a company went into
chapter 11 and the shareholders fared very well," McAllaster said.
"Most of the time when a company goes Chapter 11 you might as well
write it off and go about your business." |