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Technology Stocks : Comdisco, Inc. (NYSE: CDO) -- Ignore unavailable to you. Want to Upgrade?

To: SOROS who wrote (649)	4/17/2001 11:41:42 PM
From: Glenn Petersen	Read Replies (1) \| Respond to of 689

This is stunning news: Comdisco managers may face personal bankruptcy-report CHICAGO, April 17 (Reuters) - More than 100 senior managers at Comdisco Inc. <CDO.N> may face personal bankruptcy because of large loans they took out to buy now-deflated shares in the information technology provider, a Wall Street analyst said on Tuesday. The prospect of a rash of personal bankruptcies which might face 106 Comdisco managers is another example of the carnage that has hit investors in the once high-flying tech sector. Demand for telecommunications equipment, services that power the Internet and technology consultants has dwindled in the slowing U.S. economy. In February 1998, Comdisco said 106 senior managers bought more that 3 million Comdisco shares that, at the time, were valued at about $109 million. Based on Tuesday's closing price of $1.66 a share on the New York Stock Exchange, that investment would have a value of about $5 million. In the last year, Comdisco shares have traded as high as $34 and as low as $1.20. The threat of the executives' personal bankruptcy was raised in a report by investment bank Salomon Smith Barney analyst John Jones Jr., who downgraded his investment rating on Comdisco to neutral from outperform. He also cut his 12-month target price to $2 from $18. Under the voluntary plan designed to align managment's personal interests more closely with those of the company's shareholders, the stock purchases were paid for by 5-year personal loans to the managers from Chicago-based First Chicago NBD, the company said. Participants in the program were responsible for any losses and for repaying the loans when they came due. At the time, Comdisco said it guaranteed repayment of the loans only in the event of default. First Chicago NBD, now a unit of Bank One Corp., declined comment on the loans, citing a policy not to talk about customer relationships. In the last few years, shares of Comdisco have fallen sharply and, earlier this month, the company hired Goldman, Sachs & Co. and McKinsey & Co. Inc. as advisers to review business options to maximize the company's value. A Comdisco spokeswoman at the company's headquarters in Rosemont, Ill., declined to identify the managers, the size of the loans or the number of shares each purchased. The program runs through January 2003 and, "It's premature to comment on any aspect of the program," said Comdisco spokeswoman Mary Moster. "We have no comment on peoples' personal financial situations," she added. Experts in corporate finance and investments are concerned about the message these kinds of loans send to shareholders. "As a shareholder I would want insiders to have as much stake in the company as possible because then they are going to act in their interests and my interests - our interests are the same," said Vefa Tarhan, chairman of the finance department at Loyola University. However, "What is bizarre is that a company would guarantee these loans," he said. "You should put these guys in the same position as other shareholders." In another similar case, financial services company Conseco Inc. <CNC.N> took a $78 million charge against its earnings to cover loans it made to some directors and officers to buy Conseco shares, which went bad after the price of Conseco's shares tumbled. 21:18 04-17-01