Word: buyouts
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Like the giant truck-trailers that carry its name across U.S. highways, Fruehauf Corp. was once an American institution. But to escape a corporate raider, Fruehauf in 1986 went private in a leveraged buyout that sent the company into a skid from which it never recovered. After borrowing $1.5 billion to repurchase its stock from shareholders, the Detroit company frantically sold one division after another to lighten its debt burden. To no avail: when it completes the sale of a subsidiary that makes wheels and brakes later this summer, Fruehauf, which had 1986 revenues of $2.7 billion and ranked among...
LBOs invariably lose money at first because heavy debt charges soak up their earnings. RJR Nabisco, which went private last December in a record $25 billion buyout, last week reported a staggering $309 million loss for the second quarter. Reason: $1.05 billion in interest and debt expenses. In announcing the loss, RJR Nabisco said its basic food and tobacco operations, which include Nabisco cookies and Winston cigarettes, performed strongly; the company added that its program to sell assets was ahead of schedule. RJR Nabisco has already sold more than $2.5 billion of businesses, including most of its European food operations...
...Rainbow Platform also includes some more far-reaching proposals. It calls for direct elections to the rent control, planning and zoning boards, which currently are appointed by the city manager. It calls for revoking the controversial "buyout" clause in the new contract of City Manager Robert W. Healy, the city's chief executive, and recommends a critical review of Healy's performance...
...many, the last straw was the buyout clause, which forces the council to pay Healy the balance of his salary even if he is removed from his post. Such a contract, they say, deprives the city of it's most basic power--the right to fire the city manager...
When Financial World magazine published its annual list of Wall Street's 100 highest earners last week, no one was surprised to see junk-bond pioneer Michael Milken on top (1988 income: at least $180 million) and leveraged- buyout king Henry Kravis ($110 million) in third place. But who was this in the No. 2 position? A relatively unknown dealmaker named Gordon Cain, 77, took that spot by earning an estimated $120 million last year through his Houston LBO firm, Sterling Group...