Circle K Corp.'s bondholders committee yesterday filed a reorganization plan to challenge an amended plan the bankrupt company filed about two weeks ago.
"For the people who believe the Circle K turnaround is taking shape and want to participate in that future growth, this is the plan that offers the best alternatives," said Duncan Darrow, an attorney with the law firm of Anderson Kill Olick & Oshinsky, which represents the bondholders.
The bondholders, owed about $500 million, have opposed Circle K's restructuring plan since it was first proposed last March, according to an announcement from Anderson Kill.
A law firm spokesman said the bondholders' plan is better for the company and its creditors, particularly trade creditors. Circle K's trade creditors, upon whom it depends to provide goods and services, "are the lifeblood of the business," the spokesman said.
The unsecured creditor class, into which trade creditors fall, would see their recovery double under the bondholders' plan, the law firm said.
Michael Zaporowski, a source in Circle K's investor relations department, said he had not seen the bondholders' plan, but cited an Oct. 7 plan by Commonwealth Oil Refining Co. as another challenger, and said a fourth plan is also rumored. He declined to elaborate on those rumors.
Unlike the company's plan, the bondholders' plan does not contemplate selling the Phoenix-based company, the law firm's announcement said.
The bondholders' plan would also "dramatically" cut the company's long-term debt to $155 million from the $1 billion it had before its Chapter 11 filing in 1990, the law firm said.
Under that plan. senior creditors, which are Circle K's noteholders and banks, would share a big portion of new preferred stock in addition to all the new long-term debt issued.
Those creditors, about $180 million of senior noteholders and $340 million of bank claims, would be given $155 million of new long-term secured debt. They would also share in a new $150 million issue of 5.25% convertible preferred stock. If all the preferred were converted, the senior noteholders and banks would together own 75% of the new Circle K's common stock.
Bondholders and unsecured creditors would each get blocks of common stock, which, after the preferred's conversion is taken into account, would give each group a 12.5% equity stake in the reorganized company.
The plan also calls for distributing warrants to bondholders to let them increase their equity stake to 25% through acquisition of more common shares at designated prices during the next several years. Existing preferred stockholders would get a warrant package that would eventually give them a 2.5% equity stake.
The value of the new company's equity hinges on the valuation of the reorganized company.
"Some observers say that Circle K is worth what CK Acquisition Corp. is willing to pay, which is $399.5 million." Anderson Kill's announcement says. "But the bondholders committee has been far more bullish on long-term values and think the company could be worth nearly twice that amount."
CK Acquisition is the outside investor group seeking to purchase Circle K. Darrow am Circle K has grown considerably healthier since CK Acquisition's offer was first made.
Unsecured creditors would be given $50 million in cash under the bondholders' plan. Since Circle K went into Chapter 11 in May 1990, it has accumulated about $170 million in cash, partly because it has made almost no payments on its long-term debt since filing for bankruptcy.
While the plan earmarks most of the cash for future capital expenditures, the $50 million would go to the trade and other types of nonbondholder unsecured creditors, the law firm said. The class' claims total about $150 million. It is the only creditor group getting cash under the bondholder's plan.
With this sizable cash and equity stake being offered to unsecured credit groups, the bondholder plan is particularly favorable to trade creditors - including Circle K's large national suppliers of gasoline and auto products, soft drinks, and snack foods," the law firm's announcement says.
Using a "rather conservative valuation" of $500 million, according to the law firm, the equity blocks given the bondholders and unsecured creditors would each be worth approximately $37 million.
Under the bondholders' plan, unsecured creditors would receive about 59 cents on the dollar. Under the company's plan with its $399.5 million sale. the unsecured creditors would get about $40 million in cash, or about 25 cents on the dollar.
Also assuming the $500 million valuation, bondholders would recover about 10 cents on the dollar, senior noteholders would receive about 79 cents. and the bank group would get about 69 cents.
The bondholders committee believes its plan should receive support from the unsecured creditor class as well as bond and preferred stockholders.
Though support from senior noteholders and the bank group is "less certain," bondholders expect to get the plan approved even without support from those senior creditors, the law firm said.
Circle K creditors are scheduled to vote on the competing plans in November.
Maxus to Cut Debt
Maxus Energy Corp. yesterday said it plans to use a big slice of the $165 million it won from a settlement of a lawsuit against Kidder, Peabody & Co. to trim long-term debt.
"We intend to use approximately $123 million of our cash settlement to reduce our long-term debt in the third quarter 1992." Mike Barron, Maxus vice president and chief financial officer, said in a press release. "We plan to redeem about $111.4 million of our liquid yield option notes, which are zero-coupon, subordinated convertible notes that are redeemable at the accreted debt value, and, in February 1994, must be purchased from the holders at their option."
The liquid yield option notes are also convertible at the option of the holder into 10.2 million common shares, Barron said.
"In addition, we expect to retire about $11.7 million of 8 7/8% debt associated with the Natomas acquisition 1983 that is callable at 97," he said in the release.
Both transactions hinge on approvals from the Maxus board of directors.
In other news, the Federal National Mortgage Association today is expected to price two debenture issues totaling $1.3 billion.
One consists of $800 million of five-year debentures callable beginning Oct. 27, 1995. The other consists of $500 million, 10-year debentures callable beginning on Oct. 28, 1997. The issues will be free to trade on Oct. 23.
The five-year issue matures Oct. 27, 1997, and will make an initial interest payment on April 27, 1993.
The 10-year issue matures on Oct. 28, 2002, and will make its first interest payment on April 28, 1993.
In secondary activity, high-yield bond prices ended a slow day mixed to down 1/4 point. High-grades ended mixed in light trade.
International Lease Finance issued $150 million of 6.375% notes due 1996. The noncallable notes were priced initially at 99.332 to yield 6.567% and reoffered at various prices. Moody's Investors Service rates the offering A2. while Standard & Poor's Corp. rates it A-plus. Morgan Stanley & Co. managed the offering.
Now issues
J.P. Morgan Delaware issued $250 million of 3.65% bank notes due 1993. The noncallable notes were priced initially at par and reoffered at various prices. Both Moody's and Standard & Poor's rate the offering triple-A. First Boston Corp. lead-managed the offering.
Welbilt Corp. issued $103.5 million of 12.25% senior notes due 1999. The noncallable bonds were priced at 96.614 to yield 13%. Moody's rates the offering B2, while Standard & Poor's rates it B. Dillon, Read & Co. lead-managed the offering.
Trans Leasing International Inc. issued $13 million of 10 1/2% subordinated debentures due 2002. The bonds are callable after five years at 104. Interstate/Johnson Lane Corp. lead-managed the offering.
