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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Paul Senior who wrote (11986)	2/6/2001 4:00:04 PM
From: Terrapin	Respond to of 78476

Thread, In the "Where Are they Now" column we have Sunbeam (SOC). Mentioned here in the past. Wish I had worked shorting into my Value Investing strategy! ----------------------------------------------------------------- Tuesday February 6, 3:17 pm Eastern Time Sunbeam Files for Bankruptcy By Brad Dorfman CHICAGO (Reuters) - Home appliance maker Sunbeam Corp. (NYSE:SOC - news), burdened by a heavy debt load, shareholder lawsuits and a probe into its accounting practices, on Tuesday filed for voluntary bankruptcy reorganization. The maker of Sunbeam appliances, First Alert smoke alarms and Coleman camping gear, said all its operating units will conduct business as usual while it reorganizes under Chapter 11 of the bankruptcy code. ``This was a difficult, but absolutely necessary decision for us to make,'' Chairman and Chief Executive Jerry Levin said. ``It is, in fact, the only option that will free Sunbeam from its overwhelming burden of debt and securities-related litigation expenses.'' Sunbeam has been hampered by a heavy load of debt, most of it taken on to finance acquisitions by former Chief Executive ''Chainsaw'' Al Dunlap. The company had total debt of $3.20 billion as of Sept. 30, according to the bankruptcy filing, with $2.96 billion book value in assets. DANGEROUS LEVERAGE With such a large debt load, the company was unable to meet its obligations as the U.S. economy softened, cutting into sales of most appliance makers, analysts said. ``With that dangerous level of leverage, nothing could go wrong and obviously with this sluggish economy, things did go wrong,'' Rommel Dionisio, analyst at Friedman, Billings, Ramsey & Co., said. The company's cash had dwindled to $15 million on Friday and Sunbeam needed to file for bankruptcy protection in order to fund operating expenses and building seasonal inventory, the filing said. ``That was a very critical part of the plan, in fact, to continue to pay the vendors what we bought for the season,'' Levin said in a telephone interview with Reuters. He added that vendors in recent months had forced the company to accelerate its payments in order to receive inventory. Meanwhile, the Boca Raton, Fla., company said in November that the U.S. Securities and Exchange Commission recommended an enforcement action after a two-year probe over its accounting practices. The company has also faced shareholder lawsuits as the stock plummeted from $53 in March 1998 to mere pennies for the past several months. On Tuesday, the New York Stock Exchange said it would suspend trading on the stock immediately and has filed with the SEC for the stock's delisting. Sunbeam said its banks have agreed to provide it with a new $285 million line of credit, and it has received a commitment from General Electric Co.'s (NYSE:GE - news) GE Capital Corp. for a new $200 million accounts receivable financing program for its domestic businesses. The company said it will file its reorganization plan for itself and its domestic operating subsidiaries in U.S. Bankruptcy Court in the New York. THE PLAN Under the plan, Sunbeam would convert a substantial portion of its existing bank debt into term debt, convertible debt and equity interests in the reorganized company. The plan would also include the discharge of all of Sunbeam's securities-related litigation and bondholder debt. The company said it expects to emerge from bankruptcy in six to nine months. Banks that hold about $1.7 billion of Sunbeam's debt support the plan, the company said. Loan losses, including problems with loans to Sunbeam, hurt fourth quarter profits at Bank of America Corp. (NYSE:BAC - news) and First Union Corp. (NYSE:FTU - news). According to the bankruptcy filing, each bank holds $499.2 million in secured Sunbeam debt. Spokespeople at both banks were not available for comment. Morgan Stanley Dean Witter & Co. (NYSE:MWD - news) holds $665.6 million under its Morgan Stanley Senior Funding Inc. and Bank of New York Co. Inc (NYSE:BK - news) holds $863.7 million in unsecured subordinated bonds. Bank of New York was also unavailable for comment. A Morgan Stanley spokeswoman said the bankruptcy filing was not a surprise and added that the firm adjusts the carrying value of its debt holdings to reflect the market value of the debt. Sunbeam said it does not anticipate any work-force reductions or plant closings as a result of the reorganization. Analysts said they did not expect the reorganization to lead Sunbeam to slash prices lower than competitors, stressing that the company merely needed to get out from under its heavy debt burden. ``Sunbeam is a brand that is going to be here in five years,'' William Steele, analyst at Banc of America Securities, said. He added that the bankruptcy filing actually could be a positive step for the company, which has suffered through uncertainty about its fate for months.