Dow Jones News
Loewen Group Inc.'s (LWN) predicament is similiar to the one Philip Services Corp. (PHV), an industrial services company, recently faced in its bid to get out from under its debt load to restructure. In the end, Philip and its lenders agreed on a plan to sharply reduce Philip's debt in exchange for 90% of the company's shares.
If Loewen is planning to continue to try to sell assets to raise cash in order to cut its debt and create value for investors, then at least some debt holders would prefer the company instead file for bankruptcy protection to restructure.
Loewen's debt obligation of $300 million due Sept. 15 puts the company at disadvantage versus potential buyers in trying to get a fair price for its assets, a debt holder said. This debt payment is comparable to "operating with a gun to your head," commented the debt holder, who favors Loewen filing for bankruptcy protection over asset sales.
In addition, filing for bankruptcy protection is a fairer solution for all debt holders, another debt holder said. "We're not at a point where I would want to see any asset sales," for fear that the proceeds would be funnelled to pay off Loewen's bank lenders at the expense of Loewen's bond holders. ,b/>"If there were asset sales you would probably have the bond holders push this company into credit protection," the debt holder said.
-By Ben Dummett; 416-306-2024; ben.dummett@dowjones.ca
(END) DOW JONES NEWS 05-21-99
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