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Technology Stocks : Zenith - One and Only -- Ignore unavailable to you. Want to Upgrade?

To: Robert Utne who wrote (6321)	10/1/1999 9:08:00 PM
From: NRugg	Read Replies (2) \| Respond to of 6570

Bob I will try to paste this news story in here. WILMINGTON, Del., Oct 1 (Reuters) - A Zenith Electronics Corp. <ZETHQ.OB> shareholder is seeking permission from a bankruptcy judge to file a derivative lawsuit on behalf of Zenith against its board and its majority shareholder, LG Electronics Inc. In court papers dated Tuesday and made available to Reuters Friday, plaintiff Robert Utne Jr, owner of 250,000 Zenith shares, asked U.S. Bankruptcy Judge Mary Walrath to lift the automatic stay that protects companies in bankruptcy from lawsuits. Zenith filed for Chapter 11 bankruptcy protection in August, listing assets of $231 million and liabilities of $732 million. Walrath has scheduled a hearing Oct. 21 on Utne's request, but Utne's attorney, David Finger, told Reuters the date may change because of scheduling conflicts. In 1995, LG Electronics, a South Korean conglomerate, became a 55 percent shareholder of Zenith. Seven of the 11 Zenith directors were replaced by six LG executives and one of its attorneys, and LG's then chairman, Hun Jo Lee, became chairman of Zenith. "Since obtaining majority control of Zenith, LGE has exercised such control for its own benefit, at the expense of the minority shareholders," Utne alleges in his proposed lawsuit. If he is allowed to sue, Utne will ask the Delaware Chancery Court to rule that the Zenith directors breached their fiduciary duty and to assess them damages for allegedly causing "significant damage" to Zenith and its minority shareholders by "acting on both sides" of transactions. Any damages would be returned to Zenith, not Utne. Among the transactions Utne challenges was LGE's assumption of Zenith distribution networks in Canada and Mexico and of Zenith's VCR (video cassette) distribution to Circuit City and Sears; the cancellation of Zenith's plans to be first to market a rear projection HDTV (high density television); and a lien granted to LG against Zenith's intellectual property assets, allegedly worth $2 billion in future royalties, in return for LG's guarantee for some of Zenith's debt. Even if Judge Walrath should lift the stay and allow Utne's suit to proceed, it is not expected to affect her pending decision on whether or not to confirm Zenith's reorganization plan for emerging from bankruptcy. During a two day hearing on the plan earlier this week, a Zenith attorney told Walrath the plan "gives this company the only chance to survive." But a shareholder attorney countered "We are on the eve of HDTV technology. Investors held on, hoping for a payoff. Only one (Zenith) shareholder is participating in that upside...LG has used it dominant position...to structure" this plan. Zenith Chief Executive Jeff Gannon denied the allegation and testified "I'm an independent person." Under the plan, Zenith stock will be canceled and LG will own 100 percent of the reorganized company's stock in exchange for LG's $200 million claim against Zenith for a loan. Holders of $103.5 million in 6.25 percent bonds will receive $50 million in new 8.19 percent debentures due 2009. Bondholders support the plan. Minority shareholders, citing Ernst & Young's $1 billion valuation of Zenith, oppose the plan and want the company sold instead. An equity committee expert, Wilbur Ross of Rothschild Inc, told Reuters "a very disciplined marketing process" was appropriate in return for "extinguishing outside shareholders altogether." Zenith spokesman John Taylor said the company is aware of Utne's motion to lift the stay, has not yet reviewed it, and does not comment on pending litigation. He also told Reuters that while Judge Walrath has not said when she would decide the confirmation issue, "the company expects the plan to be confirmed." 19:01 10-01-99