Word: buyouts
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Ruckdeschel, Ventura and Loncar inhabit the lower end of the food chain that fed Michael Milken and a handful of others hundreds of millions of dollars in personal profits during the leveraged-buyout binge of the '80s. Now the continuing collapse of the junk-bond market is starving more than 270,000 First Investors clients, many of whom were lured in by deceptive tactics like those used by Ventura and Loncar. Customer losses nationwide could top $500 million...
...deal. Remember the $300-a-share United Airlines buyout that fell through? The stock closed at 99 3/4 last week. Federal Reserve Chairman Alan Greenspan should whisper to the chairman of Morgan Guaranty Trust, "Do it at $160." It's just one deal, but it could affect psychology. The crazy '80s are over, it would say ($300 a share was preposterous), but the world is not going to end, and deals can still be done at other than fire-sale prices. If investors saw UAL shoot to 160 in a deal backed by America's most highly respected bank, greed...
...companies have other ways to restructure their debt, notably by using corporate stock. Firms in relatively good financial health can raise money by offering new shares on the market. Mr. Coffee, which was leveraged to the hilt as the result of a 1987 buyout, was able to wipe out almost half its LBO debt through a new issue last May. Another technique is the debt-for-equity swap, in which corporations retire their bonds by giving lenders corporate stock. That strategy was employed by furniture maker Interco, which last week announced that it will swap 95% of the stock...
Under those circumstances, debt can make firms less competitive. Since RJR Nabisco's leveraged buyout in late 1988, in which the corporation assumed some $25 billion in debt, the company has lost market share to rival Philip Morris because RJR's management is so absorbed with managing the huge LBO, many analysts contend. In addition, loan payments, which average 30% of corporate cash flow, often divert money away from more productive pursuits, including research, advertising and capital spending. While Phillips Petroleum was digging out from under its $9 billion debt, the corporation had to pass up several opportunities to acquire...
...have heard the rumor that Donald Harvard is interested in selling his university. I am always looking for a good, high-quality investment and would like to engage in a friendly buyout of this property...