BOSTON--Dec. 26, 1995--What do the U.S.
government, Japanese banking, Smith Corona Corp. and Orange County,
Calif., have in common?
They're all on George Putnam III's year-end list of the greatest
financial fiascos of 1995.
Boston-based Putnam, America's foremost source of research on
bankruptcy and companies in default on their securities, spends most
of his time in the deadly serious pursuit of gold amid the dross of
failure. But once a year, he steps back from his solemn labors for
a quick review of the business world's gaffes.
"After all," he said, "we have year-end lists of the Ten Richest
People, Top Ten News Stories, Best Dressed Women, Greatest Athletes,
Best Movies -- for all I know, even the ten tastiest hamburgers, if
that's not an oxymoron. So I think there's a place for my list of
the ten most notable financial fiascos."
George Putnam is known as "Bankruptcy's Boswell" because of his
ability to chronicle the detritus of the business world. His firm,
New Generation Research Inc.,
publishes the annual "Bankruptcy
Yearbook & Almanac," which comes out every April.
This substantial tome has become the bible of each year's
corporate disasters. No self-respecting professional in the
bankruptcy field can afford to be without its treasure of
information on the dark side of the American Dream. Compiling its
pages helps Putnam glean many of the insights he shares with his
clients -- and draw up his annual fiasco list as well.
If you insist on seriousness, Putnam also provides a list of the
ten biggest bankruptcies of 1995, which will be included in his 1996
Bankruptcy Yearbook & Almanac:
1) Dow Corning Corp. $4.09 billion
2) Southwestern Life Corp. $3.15 billion
3) Trans World Airlines Inc. $2.49 billion
4) Grand Union Co. $1.39 billion
5) Rockefeller Center Prop. $1.25 billion
6) Caldor Corp. $1.14 billion
7) Lomas Financial Corp. $1.08 billion
8) Edison Bros. Stores Inc. $ 894 million
9) Bradlees Inc. $ 885 million
10) Harrah's Jazz Co. $ 665 million
10) Professional Athletics. "Here's an early warning if there
ever was one," he said, "and I'm not just referring to runaway
owners like Art Model of the ex-Cleveland Browns and Bud Adams of
the ex-Houston Oilers, whatever the courts decree about their moves.
"Baseball is already paying the price of cupidity, and
basketball and hockey can't keep dodging bullets forever. The main
problem with professional athletics is the exploding cost structure.
The fans are being pauperized. And how can they maintain loyalty to
players zipping through temporarily, who are nothing more than a
bunch of mercenary soldiers? When the fans lose heart, watch out for
your city stadium and arena bonds."
9) and 8) Lomas Financial and Trans World Airlines. "TWA ranks
higher only because it's bigger," said Putnam. "Otherwise they tie
because they're examples of a new trend in Chapter 11 bankruptcies.
They couldn't go broke right the first time, so now they've tried it
again. We're calling it `Chapter 22.'"
7) Rockefeller Center, another joint winner by size as well as
sadness. "This one makes me shake my head when I think what has
happened to two distinct icons at once. You've got the Rockefeller
family's long heritage of financial strength and public service.
And you've got the whole idea of Japan's vaunted business savvy.
This bankruptcy discredited them both."
6) Smith Corona Corp. "This makes my list because it's a sad
symbol of all the losers in modern technological progress. I, for
one, get a pang whenever a grand old company goes down. Of course
Smith Corona also is an example of sitting behind what seems like a
fortress franchise, only to find that it's built on quicksand."
5) Dow Corning. "Not only the year's biggest, but also one of
the most indicative of modern times. Here's a lawyers' bankruptcy
if you ever saw one," said Putnam. "Just the possibility of
lawsuits now makes mighty companies run for cover."
4) Harrah's Jazz Casino in New Orleans. "The most spectacular
implosion of the year. Their bonds went from 85 cents on the dollar
to 25 cents in just three days. And the entire project is still
nothing more than an expensive hole in the ground."
3) Caldor. "The year's fastest debacle. They reported a profit
for the quarter ended July 31 and filed for Chapter 11 in mid-
September. I give them the Wyatt Earp Award for quick-draw
bankruptcy. Related to this is my Groundhog award, which goes to
Jamesway. They peeked out of Chapter 11 to test the weather, and
then they must have seen their shadow because they scampered right
back into bankruptcy again a few months later."
2) Orange County. "Filed in
December 1994, still working all
through '95. It's quite unusual for a municipal bond issuer with
taxing power to default," Putnam said. "But if you use public funds
to buy derivatives and make a leveraged bet that interest rates will
only move one direction, you might as well be playing Russian
roulette -- with five bullets."
1) As for 1995's fiasco championship, "I declared it a tie,"
said Putnam, "between Japanese banking and the U.S. government.
We're seeing the end game of Japan Inc.'s financial strategies.
They worked well for decades, but like everything, they finally ran
up against reality.
"Now the Japanese government says it'll bail out the banks, but
not use taxpayers' money. Don't believe it, and don't underestimate
the chaos in Japanese banking these days."
Why the U.S. government? "I know, you could say this every
year," Putnam admits. "But this year's battle over the budget, with
the threats from the Administration over the possibility of default
on the U.S. debt -- this takes the cake. While the U.S. won't ever
go bankrupt, this is like a bankruptcy in that there are no winners
in this fiasco, and many losers."
Putnam's firm, New Generation
Research Inc., 225 Friend Street,
Suite 801, Boston, Mass. 02114, is a comprehensive resource center
for information on bankruptcies and turnarounds.
It publishes The
Bankruptcy Yearbook & Almanac, The Bankruptcy
DataSource, The Turnaround Letter and The Troubled Company
Prospector. It also provides customized research from its extensive
database on bankruptcies.
Its affiliate, New Generation Advisers Inc., provides investment
management services with respect to distressed securities.
Note to Editors: George Putnam is available for further
comments at 617/573-9550.
CONTACT: New Generation Research Inc., Boston,
George Putnam, 617/573-9550
DALLAS--Dec. 26, 1995--Search
Inc. (SRCG.OB) today announced that the U.S. Bankruptcy Court has
approved its disclosure statement and joint plan of reorganization
for eight of Search's subsidiaries operating under bankruptcy
protection since August 1995.
The announcement was made by Search Chairman and Chief Executive
Officer George C. Evans.
Evans said he expects Search to mail the joint plan to creditors
this week for their vote.
"Search's goal from the beginning was to reach a consensual plan
of reorganization in a timely manner," said Evans. "Clearly, we are
very pleased that we are at the voting stage of the reorganization
process within four months after the filings."
Evans emphasized that the joint plan is a consensual plan of
reorganization supported by the official creditors committee which
represents creditors of Search's subsidiaries. The joint plan was
agreed upon after three months of intense negotiations between
Search and the creditors committee, as well as extensive financial
analysis of the subsidiaries' assets and recovery options by
Search's financial advisors, Alex. Brown & Sons, and the creditors
committee's financial advisors.
According to documents filed with the court, the joint plan
involves approximately $68 million of debt issued by the
subsidiaries of which about $53 million is secured. The debt is
owed to approximately 4,500 creditors nationally.
The joint plan provides creditors two recovery options. One
option allows creditors to exchange their debt in the subsidiaries
for equity in Search. The Search equity includes a combination of a
new class of convertible preferred stock, with cash dividends paid
retroactively to July 1, 1995, and common stock.
The other option provides for the creditors' collateral which
secured their investment (e.g. cash, automobile loan contracts,
vehicles) to be transferred to a new trust established by the
creditors committee. The new trust would either sell the collateral
or continue to service the loan contracts.
According to Evans, Search's equity option represents a
"purchase" of the collateral at a premium while giving investors
marketable securities which provide upside potential to creditors
over-and-above their original investment.
Evans said he believes the creditors will vote to accept the
joint plan by the required amounts and that it would be confirmed by
the court in mid-February 1996. He noted that upon confirmation of
the joint plan and the infusion of new equity, Search will be in a
position to execute long-term financing commitments to fund Search's
Search Capital Group, Inc. is a specialized financial services
company engaging in the purchase, management, and securitization of
used motor vehicle receivables. Search shares (SRCG.OB) are
currently being traded on the OTC Bulletin Board.
CONTACT: Stern, Nathan & Perryman,
Chris Anderson, 214/373-1601