PITTSBURGH, PA - June 25,, 1996 - MK Rail Corporation (Nasdaq:
MKRL) today announced that it has signed a definitive agreement to
repurchase the debt that the company owes to Morrison Knudsen
Corporation (NYSE: MRN).
Under the agreement, MK Rail is to repurchase the debt, which
has an outstanding balance of $56.2 million including accrued
interest, for a total of $34.5 million. MK Rail plans to finance
the transaction with the proceeds from previously announced asset
sales, cash from operations, and proceeds from other borrowings or
non-essential asset sales.
"This debt repurchase represents the final and most important
element in MK Rail's restructuring and turnaround, and it positions
the company for future growth," said John C. (Jack) Pope, MK Rail's
chairman. "At the beginning of 1996, we established a goal of
significantly lowering the amount of debt on MK Rail's balance
sheet, which then stood at about $120 million. Through this debt
repurchase and our improved operating results, we expect to reduce
debt to about $65 million."
The debt repurchase, which is subject to certain conditions, is
expected to be completed during the third quarter, in conjunction
with Morrison Knudsen's emergence from bankruptcy.
As part of its bankruptcy filing, Morrison Knudsen expects to
distribute its 63 percent of MK Rail stock to its creditors. MK
Rail has agreed to provide registration rights to these creditors,
and Morrison Knudsen has agreed that this stock will be subject to
standstill and voting provisions, which generally prohibit the
solicitation of proxies, initiation or inducement of tender offers
and other efforts to influence or control the management or policies
of MK Rail. The voting provisions require that for a specified
period, during which a majority of MK Rail's Board of Directors
consists of independent directors, this stock will be voted in favor
of MK Rail's nominees to its board. This period will end on the
earlier of the date two years after Morrison Knudsen distributes the
stock, or the date that stock subject to the standstill and voting
provisions represents less than 15 percent of MK Rail's outstanding
common stock. Also, this stock is subject to transfer restrictions
under which transferees, other than those receiving stock in certain
registered offerings, must agree to be bound to these provisions.
MK Rail has also amended its Stockholders Rights Plan. As a
result of the amendment, the rights will be exercisable and will
trade separately from the company's common stock if a person or
group of persons becomes the beneficial owner of 15 percent or more
of the company's common stock (rather than 10 percent or more, as
was previously provided), or if a person commences a tender offer or
exchange offer, the consummation of which would result in such
person being the beneficial owner of 15 percent or more of the
common stock (rather than 10 percent or more, as was previously
provided). The amendment also provides that a merger of Morrison
Knudsen will not constitute a "change of control event" as defined
in the plan, provided certain conditions are satisfied including
prompt distribution of the MK Rail stock.
MK Rail is a leader in the manufacturing and distribution of
locomotive components; provides locomotive fleet maintenance and
overhauls; and manufactures switcher locomotives.
CONTACT: Tim Wesley of MK Rail, 412-237-2250, ext. 161
WORCESTER, Mass., June 25, 1996 - A Leominster man
pleaded guilty today to three counts of bankruptcy fraud for
concealing assets and making false statements in his bankruptcy.
United States Attorney Donald K. Stern stated that DAVID M.
FLANAGAN, 41, of 640 Central Street, Leominster, Massachusetts,
pleaded guilty today to concealing from his bankruptcy creditors and
the bankruptcy trustee his ownership in the property he lived in.
In addition, FLANAGAN pleaded guilty to making a false statement by
claiming to pay rent for living at that same address, and also for
making a false statement denying that he was an officer and director
of a company called Corporate Realty, Inc., which owned an apartment
building with commercial space located at 100-104 Daniels Street,
At a hearing before United States District Judge Nathaniel M.
Gorton in Worcester, a prosecutor stated that FLANAGAN had received
the deed for the Leominster property nearly two years before filing
for bankruptcy, but did not record the deed at the Registry of
Deeds. The prosecutor advised the Court that one month before
filing for bankruptcy, FLANAGAN arranged to list the property for
sale with a real estate broker. FLANAGAN did not sell the property,
but failed to list it in his bankruptcy schedules when he filed, and
denied owning the property at a meeting of creditors. FLANAGAN
recorded the deed about a year after his bankruptcy was closed, at
the same time he conveyed a part of the land to his girlfriend.
FLANAGAN faces a maximum penalty of five years' imprisonment and
a $250,000 fine on each count. Judge Gorton scheduled his
sentencing for September 4, 1996.
The case was investigated by agents of the Federal Bureau of
Investigation, was referred by the U.S. Trustee's Office in Boston
and Worcester, and is being prosecuted by Assistant U.S. Attorney
Mark J. Balthazard of Stern's Economic Crimes Unit.
CONTACT: Joy Fallon or Anne-Marie Kent of the U.S. Attorney's
BOISE, Idaho, June 25, 1996 -- Morrison Knudsen
Corporation (NYSE: MRN), a Delaware holding company, announced today
that as planned, the company has filed its plan of reorganization
under Chapter 11 in the United States Bankruptcy Court for the
District of Delaware. The plan of reorganization pertains only to
the corporate parent company and does not involve MK's operating
companies, Morrison Knudsen Corporation of Ohio and National
Projects, Inc., or any of their engineering, construction,
environmental and mining subsidiaries. MK's plan of reorganization
was approved by MK's secured creditors and provides for, among other
things, the merger of Morrison Knudsen with Washington Construction
Group, Inc. and an exchange of MK's existing secured debt for new
equity in the combined company.
"Our prepackaged reorganization provides an excellent vehicle
for relieving the parent corporation of its debt and enabling our
operations, which are strong and healthy, to be even more
competitive in the marketplace," said Robert A. Tinstman, MK's
President and Chief Executive Officer. "The financial restructuring
at the corporate parent level does not involve our operating
companies. With strong core operations and a $60 million working
capital facility in place, MK will continue to honor all contract
commitments and obligations to clients, joint venture partners,
subcontractors and suppliers and pay employees on time and in full."
Morrison Knudsen of Delaware filed its voluntary petition for
reorganization in Wilmington, Delaware and received approval of
first day motions which ensure that the company can continue in the
ordinary course of business. The corporation's plan of
reorganization is expected to be consummated by September 30, 1996,
subject to possible modification and the satisfaction of certain
conditions, and would result in an essentially debt-free company
with a strong balance sheet and substantial bonding capacity.
Morrison Knudsen's operating groups serve the world's
environmental, heavy civil, industrial, mining, operations &
maintenance, power, process and transportation markets as an
engineer and constructor.
CONTACT: Brent Brandon, Vice President of Corporate Communications
of Morrison Knudsen, 208-386-6612