Wang Laboratories Inc.'s terminally ill founder was already having Chapter 11 petitions drafted when current Chairman Richard W. Miller joined in 1989.
Yesterday, Mr. Miller filed his own set.
"For the past three years, in the face of recession and continuing upheaval in the industry, we have fought to bring Wang back from the brink of bankruptcy," said Mr. Miller, who became chairman and chief executive officer million Dr. An Wang's death in March 1990. "We came very close to making it. We simply ran out of time."
In a press release issued yesterday, Mr. Miller said he hoped to avoid Chapter 11, but saw no other way for the computer company to restructure.
"This is a drastic step that I deeply regret" he said.
Mr. Miller stressed that the plan would allow Wang to stay in business and move its recovery plan forward. Wang expects to emerge from Chapter 11 as a "smaller, more focused, and more competitive company with revenues of about $1.4 billion, compared to $1.9 billion now." Wang also plans to cut 5,000 jobs.
Excluding the restructuring and other unusual items, Wang reported a $34.2 million fourth-quarter operating loss. That compares with a $70 million loss for the same quarter last year. The net loss for the quarter was $116.3 million compared to $314.5 million for the same period last year.
Jake Foley, a senior analyst in PaineWebber Inc.'s high-yield research group, said Wang had five convertible subordinated debt issues outstanding totaling about $480 million as of yesterday.
Senior to that is about $33.3 million of bank debt, $124 million in letters of credit and guarantees, and $690 million in trade and other debts. The $690 million includes an IBM investment and an advance payment totaling an estimated $50 million, Mr. Foley said.
"The bondholders are going to have to have a speculative appetite. The gamble here is how contentious the restructuring will become," he said. "It's going to be a bumpy ride."
Asked what Wang must do to return to profitability, Mr. Foley replied, "They have to convince everyone that they have a viable business plan that will generate cash flow and investor interest."
Melanie McCrossen, a director at Standard & Poor's Corp., said the agency has lowered its rating on Wang's outstanding debt to D from CCC-minus.
"It's a definitional thing," she said. The action affects some $441 million of subordinated debt. Wang, which was slow to adapt as the industry changed, suffered again when the entire industry slowed down, she said.
Of the company's Chapter 11 filing, she said, "It's kind of interesting because there haven't been too many technology companies that have to take that route."
According to Wang's release, the company that Dr. Wang, a Chinese immigrant, founded in 1951 began losing ground in the mid-1980s. The industry had begun shifting from minicomputer and proprietary systems such as Wang's to smaller PCs or open systems receptive to many vendors' technologies. The company stopped growing by the late 1980s and was reporting heavy losses.
After Mr. Miller took over as chairman two years ago, he and his team began to cut costs and paid off $575 million of debt, Wang's cash flow and resources were not enough to complete the restructuring without using Chapter 11.
Though company officials were unavailable to answer questions concerning the bonds, a statement read in part by a company spokesman said the bonds' value would be determined through the court process.
In secondary trading yesterday, traders reported no activity in Wang's bonds.
"Wang's not trading right now." one trader said, adding that the bonds will start trading "once people get their stories together." Overall in,, the high-yield market, better quality issues were mixed to up 1/4, traders said.
High-grade bond prices tracked Treasuries, gaining 1/8 to 3/8 following a 2.8% decline in July housing starts.
Associates Corp. of North America issued $300 million of 5.875% notes due 1997. The noncallable notes-were priced at 99.60 to yield 5.97%, or 55 basis points over comparable Treasuries. Moody's Investors Services rates the offering A1, while Standard & Poor's rates it AA-minus. Kidder, Peabody & Co. lead managed the offering.
New England Power issued $170 million of 8% guaranteed and refunding mortgage bonds due 2022. Noncallable for 10 years, the bonds were priced at 99.204 to yield 8.07%. or 72 basis points over comparable Treasuries. Moody's rates the offering A1, while Standard & Poor's rates it A-plus. Goldman, Sachs & Co. won competitive bidding to underwrite the offering.
Florida Power & Light issued $100 million of 8% first mortgage bonds due 2022. Nonrefundable for five years, the bonds were priced at 98 to yield 83 basis points over comparable Treasuries. Moody's rates the offering A2, while Standard & Poor's rates it A. Kidder Peabody won competitive bidding to underwrite the offering.
Federal National Mortgage Association issued $250 million of stepup medium-term notes due 1995 at par. The 4.375% notes were priced to yield 100 basis points over one-year Treasuries and are noncallable for a year. After the call date the interest rate increases to 47/8%. Lehman Brothers sole managed the offering.
Federal Farm Credit Bank issued at $200 million of floating-rate notes due 1995 at par. The notes float weekly at 30 basis points over three-month Treasury bills. Goldman Sachs sole managed the offering.
Federal Home Loan Mortgage Corp. issued $200 million of 6.3% notes due 1999 at par. The notes float weekly at 30 basis points over three-month Treasury bills. Goldman Sachs sole managed the offering.
Fleet Mortgage Group issued $150 million of 6.125% notes due 1997. The noncallable notes were priced at 99.811 to yield 6.169%, or 75 basis points over comparable Treasuries. Moody's rates the offering A3, while Standard & Poor's rates it A-minus. Goldman Sachs lead managed the offering.
International Lease Finance issued $100 million of floating-rate notes due 1994. The noncallable notes were priced initially at par and float quarterly at 25 basis points over the London Interbank Offered Rate. Moody's rates the offering it A-plus. Goldman Sachs sole managed the offering.