Troubled Olympia & York Developments Ltd. yesterday unveiled a restructuring plan that divides Olympia & York's assets into four different companies and gives bonds to unsecured lenders.
"After extensive negotiations and discussions with creditors, this is the proposal that best fits Olympia & York Developments' and the creditors' needs," Frank Ternan, an Olympia & York Developments spokesman, said yesterday.
The bankrupt Canadian company believes its creditors and stockholders are best served by "continued operation rather than a forced liquidation of assets," the spokesman said.
If creditors approve the plan, in addition to Olympia & York Developments, the three other companies that would result are: Reichmann Holdings, O&Y Properties and OYRC Holdings.
The bonds, distributed to unsecured creditors in the amount they are owed, will convert into 90% equity in Olympia & York upon maturity unless the company repays them in full.
Olympia & York Developments and its 28 Canadian subsidiaries, together known as Olympia & York, filed their "plan of compromise and arrangement" with the Ontario Court of Justice on Tuesday.
Yesterday they were expected to file a Chapter 11 reorganization plan for Olympia & York Developments and SF Holdings Corp. in U.S. Bankruptcy Court for New York's Southern District.
Olympia & York Developments believes its plan's approval will resolve creditor claims, will provide appropriate guidelines for managing Olympia & York and disposing of certain assets, and will preserve valuable business assets.
Under the plan, the existing shareholders, the Reichmann family, would start a new company called Reichmann Holdings to hold their assets in Olympia & York Developments and the two other new companies.
Reichmann Holdings will own 100% of Olympia & York Developments' issued shares until the five-year, non-interest bearing bonds issued to the unsecured creditors mature. Upon the bonds maturity, holders, unless they are paid in cash, will receive 90% of Olympia & York Developments shares.
Also, a Canadian real estate firm, 90% owned by Olympia & York Developments and 10% owned by the Reichmanns' holding company, would be created to hold Olympia & York Developments' major Canadian real estate assets. The company will be called O&Y Properties.
"This company will be able to benefit from any future upturn in the Canadian real estate market," the release says.
Finally, Olympia & York Realty Corp., through which Olympia & York Developments owns its U.S. operations, including its real estate and the common shares it holds of Catellus Development Company and Santa Fe Energy Resources, will be spun off into a new company called OYRC Holdings.
OYRC Holdings would also be able to benefit from upturns in the U.S. real estate market.
"The separate existence of this company should achieve substantial benefits for unsecured creditors," the release says. "Ultimately, it is expected that this company will be owned 51% by the company established by the [Reichmanns] and 49% by the unsecured creditors."
As part of the spinoff, OYRC Holdings will issue to Olympia & York $500 million of a 10-year note yielding 7 1/2% annually. The note will be assigned to the Olympia & York Developments bondholders' trustee and will be distributed proportionately to bondholders in three years as a partial payment for their bonds.
Olympia & York Realty's spin-off must be carried out as part of a confirmed Chapter 11 plan for Olympia & York Developments. Consequently, the Canadian plan's success hinges on U.S. bankruptcy court's confirmation of the Chapter 11 plan.
In Canada, 34 creditor classes will vote on the plan during meetings currently scheduled from Nov. 25 to 30. Voting under Chapter 11 will take place according to a timetable to be set by the bankruptcy court.
The Chapter 11 plan excludes the assets or liabilities of Olympia & York Realty Corp., O&Y Equity (Canada) Ltd. or O&Y (U.S.) Development Canada Ltd., which own Olympia & York's U.S. subsidiaries.
New Junk Deals Ahead
School's back in session in high-yield land after last week's Donaldson, Lufkin & Jenrette Securities Corp.'s conference and at least four offerings are slated for this week.
Deals expected include: Overhead Door Corp.'s $90 million, seven-year senior note offering; Dial Page's $75 million, 10-year senior note deal: Multicare Cos.' $100 million 10-year senior note offering; and TKR Cable 1's $350 million 15-year senior note offering.
Other deals are beginning roadshows, the buy-side source said, adding that he spends approximately 50% to 70% of his time reading red herrings. However, a trader yesterday said he's heard of a number of deals that have been postponed.
First Boston Corp. is managing the Overhead deal, price talk on which is 12 1/2 area. Donaldson, Lufkin & Jenrette will handle the Dial Page and Multicare offerings. Merrill Lynch is handling TKR Cable.
Buy-side sources added that the offerings are more attractive than what was available three to four weeks ago. One added that single-B credits are yielding in the 12% range now.
In secondary trading, high-yield bonds and high-grade bonds lost 1/4 point in sympathy with Treasuries in quiet trading.
Long Island Lighting Co. issued $451 million of 9% debentures due 2022. The debentures were priced at 99.382 to yield 9.06% or 145 basis points over comparable Treasuries. They are callable after 10 years at 104.19. Moody's rates the offering Baa3, while Standard & Poor's rates at BBB-minus. Lehman Brothers lead managed the offering.
Federal National Mortgage Association issued $130 million of 5.050% medium-term notes due 1995. Noncallable for a year, the notes were priced at 99 30/32 to yield 5.073% or 31 basis points over comparable Treasuries. Lehman managed the offering.
Safeway Inc. issued $74 million of 10% senior notes due 2002 at par. The noncallable notes were rated Ba2 by Moody's and BB-minus by Standard & Poor's. Salomon Brothers Inc. sole-managed the offering.