Consensual Plan Removes Major Hurdle to Emergence from Chapter 11
JOPPA, Md., February 23, 1995 -- Merry-Go-Round
Enterprises, Inc. href="(NYSE:MGR)" target=_new>http://www.secapl.com/cgi-bin/edgarlink?MGR">(NYSE:MGR)announced
that it filed a plan of reorganization today in U.S. Bankruptcy
Court jointly with its official creditors' and equity committees. The terms
of the plan are consistent with the term sheet agreed upon by the company, its
court appointed committees and its major creditors in December.
Tom Shull, MGRE's Chairman and Chief Executive Officer, said, "This plan is
the culmination of months of hard work and cooperation on the part of all of
our major constituencies. We are very encouraged by our ability to move
forward quickly in keeping with our aggressive timetable for emerging from
R. Jerry Scheel, as representative of MGRE's creditors'
"Now that we have filed a consensual agreement, which includes the support of
all major stakeholders, MGRE management can fully focus its time and efforts
on the execution of the company's business plan and returning Merry-Go-Round
The terms of the plan of reorganization call for the distribution of up to
$130 million in cash and market rate debt securities plus 75% of the stock of
the reorganized company to unsecured creditors, and the distribution of 25% of
the common stock of reorganized Merry-Go-Round to present shareholders,
assuming $225 million in Allowed Unsecured Claims.
The plan further provides that if Allowed Unsecured Claims should exceed
$225 million after the estate completes the claim reconciliation process, the
stock issued to the current stockholders would be reduced, in essence, by one
percent for each $5,333,333 of excess claims, but under no circumstances will
the present shareholders' recovery be reduced below 10% of the new shares.
For each one percent reduction in stock issued to the current stockholders,
the company will issue warrants to purchase one percent of the stock for an
estimated $2.0 million, exercisable for three years.
In addition, for each $1 million by which the cash distributed to unsecured
creditors exceeds $25 million, current shareholders will receive warrants to
purchase 0.2% of the reorganized company's equity, up to a maximum of five
percent of the total new shares outstanding. These warrants will be
exercisable for three years at an estimated strike price of $1.6 million per
one percent of the reorganized company's equity.
"We have worked extremely hard to forge a plan that we believe allows for a
fair recovery for all stakeholders and a swift emergence from Chapter 11,"
added James Kenney, MGRE's President and Chief Operating Officer. "We are on
an aggressive timetable to achieve confirmation, and with continued
cooperation from all of our stakeholders and the commitment and hard work of
our employees, we feel this plan could be confirmed by as early as this
"This joint effort represents the best alternative for maximizing the
recoveries of shareholders as well as creditors, and has our strong
commitment. With continued operational and financial improvement, this plan
should remove a major obstacle on the path to emergence from Chapter 11,"
added Wilbur L. Ross, Jr., Senior Managing Director of Rothschild Inc.,
financial advisor to MGRE's equity committee.
Implementation of the plan is dependent on a number of factors, including
demonstration of MGRE's financial turnaround and the negotiation of adequate
Merry-Go-Round Enterprises, Inc., which filed for Chapter 11 in January
1994, is a specialty apparel chain selling contemporary fashions for young men
/CONTACT: Michael T. Lennon of MWW/Strategic Communications, Inc.,
201-507-9500; Isaac Kaufman of Merry-Go-Round Enterprises, Inc., 410-538-1000;
R. Jerry Scheel of Official Committee of Unsecured Creditors, 414-730-3766; or
Wilbur L. Ross, Jr., 212-403-3581, Rothschild Inc. - Financial Advisor,
Official Committee of Equity Security Holders/
ORANGE, Calif.--February 22, 1995--When the href="chap11.orange.html">Orange County
Transportation Authority (OCTA) instituted a 100-Day Action Plan to respond to
the Orange County Investment Pool collapse and bankruptcy, it was designed as
a short term response to the pressing crisis.
Today the plan's successful implementation continues on schedule, is
two-thirds complete and serves as a foundation for OCTA's long-term
"The OCTA continues to achieve its goals while coping with Orange County's
financial crisis," said OCTA Chief Executive Officer Stan Oftelie. "Despite
the financial uncertainty facing every agency, we have clear indications that
the OCTA is restoring Wall Street's confidence.
"In fewer than 10 weeks, the OCTA is operating at full strength," Oftelie
said. "We have adjusted to the challenging financial environment and we're
addressing the transportation future right now."
The OCTA's future was less secure 70 days ago. Only a week after the County
of Orange declared bankruptcy on Dec. 6, 1994, the OCTA Board of Directors
adopted a 100-day operating plan with three major goals:
--Paying investors on time;
--Continuing bus and train service without disruption;
--Moving freeway and road construction projects forward.
"We are two-thirds of the way through the 100-day plan and, so far, every
goal has been met," Oftelie said. "Like every government agency in Orange
County, we face uncertainty. But, we face that uncertainty with growing
The optimism is based on a number of recent OCTA actions:
--Meeting $46 million in debt obligations on Feb. 15;
--Regaining strong credit ratings by Moody's Investors Service and Standard
& Poor's, the nation's two premiere financial rating agencies;
--Restarting more than $13 million in design contracts employing private
sector engineering firms for future freeway construction projects;
--Advertising for bids for the $25 million freeway construction project on
the Costa Mesa Freeway (55) between 17th Street and the Garden Grove Freeway
--Preparing a bus route network redesign plan for OCTA Board consideration
Among the obstacles facing OCTA are the continued bankruptcy proceedings for
the Orange County Investment Pool (OCIP) and for the County itself. OCTA had
more than $1 billion in assets in the investment pool at the time of the
bankruptcy and is working with other creditors to develop a workable
The current estimate of immediate cash loss for investment pool creditors is
pegged at about 22 percent. For OCTA, the OCIP could affect as much as $260
The OCTA and 193 other government agencies are exploring a recovery plan
that would release 77 cents on every dollar or $872 million in OCTA funds that
were held in the pool on Dec. 6. The County would repay the OCTA's remaining
23 cents on the dollar over time with a combination of notes, claims and other
While this will affect scheduling of some future projects, officials are
confident that there will be little or no effect on Measure M projects
financed through a voter-approved half-cent sales tax.
"We have a commitment to the voters of Orange County to faithfully implement
the Measure M program of improvements for freeways, streets and transit
facilities," said Oftelie. "There might be some adjustments in our schedule,
but we expect to complete all of the projects within the 20-year time frame of
the ordinance. And we will continue to provide quality bus and rail
CONTACT: Orange County Transportation Authority, Orange
Elaine Beno, media relations manager, 714/560-5571