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

To: Frederick Smart who wrote (6333)	10/4/1999 8:54:00 PM
From: Robert Utne	Read Replies (3) \| Respond to of 6570

Fred, An important story to Zenith shareholders, bondholders and employees was written today by a renown national reporter for Federal Filings, Jeff St.Onge, and transmitted by FFBN to Dow Jones but Dow Jones (owners of the Wall Street Journal) has, to this moment, chosen to ignore. My guess is that the story was sent to Rick Stine of the WSJ for approval, Rick called John Taylor, Taylor called John Koo and Koo (via Taylor) threatened a lawsuit against Dow Jones if the story ran. Here is the story: Zenith Shareholder Seeks Lawsuit Against Directors, LGE FFBN SOURCE: Bankruptcy ISSUER: ZENITH ELECTRONICS CORP. SYMBOL: ZETHQ WASHINGTON (FFBN) -- Zenith Electronics Corp.'s effort to speedily reorganize through a prepackaged Chapter 11 bankruptcy may have hit another obstacle. Robert Utne Jr., holder of 250,000 Zenith common shares, has asked the bankruptcy court to lift the Bankruptcy Code's "automatic stay" to allow him to pursue a shareholder derivative suit against the electronics manufacturer's directors and its controlling shareholder, LG Electronics Inc. (Q.LGE). Utne says in the motion to lift the automatic stay, which protects bankrupt companies from legal claims, that "since LGE obtained majority voting control in Zenith, LGE has caused Zenith to engage in a series of transactions" benefiting LGE at the expenses of the minority shareholders. Utne said in an interview that he's been living Zenith's situation for three years. "I was the only shareholder at the last annual meeting (May 22, 1997) who stood up and grilled the CEO about the value of the patents and the STB (set top box) contracts," Utne said. "My objective is to represent the entire community of Zenith . . . to assure that all shareholders, bondholders and employees have the opportunity to participate in the golden future of digital television, largely developed by Zenith engineers," Utne added. As reported, Zenith's Chapter 11 petition filed Aug. 23 listed $311 million in assets and $732 million in liabilities. Under Zenith's reorganization plan, all outstanding common stock will be canceled, and stockholders, including LGE, Zenith's majority shareholder and a major creditor in the case, will receive nothing for their existing equity stakes. LGE and its affiliates acquired a controlling interest in Zenith's common stock in November 1995. LGE will receive 100% ownership of Zenith in exchange for $200 million that Zenith owes it. The Korean conglomerate will also receive certain Zenith manufacturing assets in exchange for forgiving certain other debt the company owes. In addition, holders of the $103.5 million principal amount of Zenith's 6.25% convertible subordinated debentures would receive $50 million of new 8.19% senior debentures maturing in 2009. The bondholders support Zenith's plan. However, the electronics manufacturer's official committee of equity security holders and 12 individual stockholders objected to Zenith's prepackaged reorganization plan and the accompanying disclosure statement. The equity committee also opposed the company's retention of investment banker and financial adviser Peter J. Solomon Co. The equity committee charged that the prepackaged plan is unfair to minority shareholders, was proposed in bad faith, is inequitable and is premised on a valuation prepared by a biased investment banker. The equity committee thinks Zenith is worth over $1 billion. After two days of hearings last week, Judge Mary F. Walrath said she need more time to consider whether to confirm Zenith's reorganization plan. Judge Walrath has asked both parties to provide their closing statements by the end of business Monday. Utne says that one possibility is that Judge Walrath will order the prepackaged Chapter 11 be substituted by a normal Chapter 11 in order that all parties have a full opportunity to be involved in the process. "I believe this to be one of the most important restructuring cases in U.S. history," Utne said. "If approved, any company can purchase as little as 50.001% of another company, decimate the value of that company through self-dealing . . . become the sole creditor and assume 100% of the equity in . . . bankruptcy court." Utne said that he has investigated Zenith's plants in Mexico and talked with scores of Zenith officers and employees over the past few years. "I know there is tremendous asset value in Zenith including its approximately $2 billion in set-top box and integrated receiver decoder contracts with Americast and subsidiaries of News Corp.; its flat tension mask technology; the Zenith trade name; TV production plants in Mexico; and several billion dollars of value in its hundreds of patents, the most important being its 8-VSB (digital television) patents." Zenith's high-definition television patents are the standard for the terrestrial transmission of such signals in the U.S., Canada, South Korea, Argentina and Taiwan, according to Utne. Utne said that if he were successful in court, LG Electronics would remain an important partner of Zenith. He also hopes that Zenith will bring in other partners such as Intel Corp. (INTC), Microsoft Corp. (MSFT) or Motorola Inc. (MOT). "We Zenith shareholders, bondholders and, certainly, Zenith's U.S.- based workforce only ask to remain included in the Zenith community," Utne adds. "Our investments helped to finance Zenith's successful transition from an analog-based company to what we believe will be one of the most successful consumer electronics companies in the coming millenium." Utne said he expects a hearing on his request on Oct. 28, but that the bankruptcy court has not set a firm date.