Gillett Holdings Announces Tentative Agreement on Reorganization
DENVER (AP) _ A proposed reorganization of Gillett Holdings Inc. would make owner George Gillett a minority partner but leave him in charge of day-to-day operations of the company.
The proposal, if approved by U.S. Bankruptcy Court, reportedly would give majority control of Gillett Holdings to Altus Finance of France and a group headed by Leon Black, a former Drexel Burnham Lambert Inc. executive.
Gillett attorneys have until Feb. 4 to file a formal plan disclosing terms of the reorganization in U.S. Bankruptcy Court.
Gillett Holdings, which owns television stations, a meat packing plant and Vail and Beaver Creek ski areas, filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code in June after unsuccessful efforts to restructure more than $1 billion of costly junk bond debt.
On Tuesday, the company announced it had reached a tentative agreement with its creditors on a reorganization plan, but refused to make the plan public.
″The plan was reached with unanimous support by a creditors’ committee that represents various classes of Gillett Holdings’ creditors,″ the company said in a statement.
A spokesman for Black’s Apollo Investments Group of Los Angeles said, ″It was in everyone’s best interest to come up with a plan that leaves the company in a less-leveraged state, but leaves management in direct control.″
Although company officials declined comment on the proposed reorganization, sources told the Denver Post that George Gillett’s stake in his empire would drop from 100 percent to 13 percent. The Altus-Black group would take 52 to 55 percent ownership and invest $40 million in the firm.
Black’s group, which owns about $140 million of Gillett’s senior bonds, reportedly will agree to accept new bonds that would have a lower repayment priority to other investors’ claims.
Black underwrote the junk bonds that allowed Gillett to purchase a number of television stations in 1987. When advertising dropped off, the company failed to generate enough cash to meet hefty bond interest payments.
Black later joined with Altus, a subsidiary of Credit Lyonnais of France, to buy $5.3 billion of junk bonds from the portfolio of the failed Executive Life Insurance Co. of California. Those bonds included the Gillett Holdings zero-coupon notes.
Gillett Holdings consists of the Vail-Beaver Creek ski areas; Packerland, a Wisconsin meatpacking business; and television stations in Tampa, Fla., Monterey-Salinas, Calif., and San Luis Obispo-Santa Barbara, Calif.
In October, Black proposed a bailout for Gillett which would give his group majority control. Black’s plan was opposed by Carl Icahn, chairman of Trans World Airlines, who alleged Black wanted to take control of the company at cheap prices.
Icahn owns an estimated $60 million face value of Gillett Holdings zero- coupon notes. His group includes T. Rowe Price Associates of Baltimore and other institutional investors.
A telephone message was left Wednesday at Icahn’s New York office seeking comment on the proposed reorganization plan, but it was not returned immediately.
Two weeks ago, Icahn said he did not object to George Gillett remaining in control of the company, but ″the problem I have is that I don’t think that the plan is treating the subordinated bondholders fairly.″