Sunbeam Corp. chief executive Al J. Dunlap got a good grilling from bankers Tuesday as he sought investors for $2 billion worth of loans.
The controversial CEO, known as "Chainsaw Al" because of his slash-and- burn restructurings, fiercely defended himself and his company's strategy in light of a critical story that appeared in Barron's on June 8, said bankers who attended the meeting in New York. The story suggested Sunbeam's profitability in 1997 was "largely manufactured."
The confrontation compounded the problems Morgan Stanley, Dean Witter & Co. has been having in syndicating a $2 billion loan package designed to help Sunbeam finance a recent buyout binge.
Sunbeam, based in Delray Beach, Fla., is seeking investors for a $600 million revolver and $1.4 billion term loan for its acquisitions of Coleman Co., Signature Brands USA, and First Alert Inc. The loan is being led by Morgan Stanley with co-syndicators BankAmerica Corp. and First Union Corp.
Criticism of Mr. Dunlap's leadership at Sunbeam has been growing in the last few weeks; the company announced a $7.8 million operating loss for the first quarter, and its stock priced has dropped 50% from its high under Mr. Dunlap.
That has caused investors to second-guess the risk factor in committing to Sunbeam debt. As a result, Morgan Stanley has revised its pricing on the loan from 1.50% over the London interbank offered rate to Libor plus 2%.
But even that repricing has come under criticism. Bankers say the Libor plus 2% pricing is good for only the first few months of the loan.
"It's window dressing," one banker said. "You have to wonder if Sunbeam is now saying, 'Beam me up, Scotty.' "
Other bankers say they sympathize with Morgan Stanley's predicament. It's not the first time a firebrand CEO has challenged investors at a bank meeting.
In 1994, Leonard Green, chief executive of Leonard Green Partners, told prospective investors at a Los Angeles bank meeting to "go to the beach" if they didn't like a $150 million dividend paid to Mr. Green and shareholders as part of the firm's buyout of PayLess drugstores.