Early voting results show three of Circle K Corp.'s four major creditor groups favor its reorganization plan, the company's chairman said yesterday.
"In a football contest, we're down at about the three-yard line, and it's first down and goal to go," Bart A. Brown Jr., Circle K's chairman and chief executive officer, said in a telephone interview yesterday, commenting on the company's proximity to emerging from Chapter 11 bankruptcy protection.
Brown said, however, that despite the vote, representatives of a competing reorganization plan proposed by bondholders have told him they believe their plan still has a chance.
The bondholders are the fourth creditor group. An attorney representating bondholders could not be reached for comment yesterday.
Circle K yesterday said in a release that its bank group, senior secured noteholders and its unsecured creditors voted "overwhelmingly" to approve Circle K reorgnization plan, which calls for selling the company for $399.5 million to CK Acquisitions.
Balloting began Jan. 15 and ended on March 17.
"Obviously, the Bankruptcy court must still approve other important parts of our plan, but this is a major critical step," Brown said in a release.
The bondholders' group filed its own reorganization plan last October. The group, which according to Brown represents about $450 million in debt, has strongly opposed the Circle K plan, which essentially gives them nothing.
About 20,000 creditors were mailed ballots to vote on the plan. For the three groups favoring it, Circle K's plan "more than satisfied" two requirements: it got the appoval of at least half of the number of claimants voting, and the approval of at least 67% of the dollar amount of the claims voted. The bondholders were not solicited because, getting nothing, it was obvious they would oppose the plan, Brown said.
More than 90% of the bank group, 75% of the senior secured noteholders, and 80% or the unsecured creditors voted for Circle K's plan.
"It's very gratifying after three years of this arduous process to be able to look forward to the final stage of Circle K's Chapter 11," said Brown in the release,
"With the company's confirmation hearings scheduled to begin April 7, we believe the end of Circle K's bankruptcy is truly in sight."
The preliminary results of the voting may be adjusted further and need to get bankruptcy court approval, the release said.
The company believes but cannot be sure that the vote heralds final creditor approval of Circle K's reorganization plan, the release said. Brown said that while he does not see how it would be possible, the bondholders believe they can force a "cram down" on the three other groups. The bondholders are subordinate to the banks and noteholders, while they are level with the unsecured creditors.
"They didn't carry a single one of the three [creditor] classes," Brown said.
In other news yesterday, Eaton Corp. said it has called its outstanding 9% debentures due March 15, 2016 for redemption.
The outstanding debentures total more than $73.8 million.
The debentures are scheduled for redemption on April 19 at a price of 105.525% of the principal amount, for a total of more than $77.9 million plus accrued and unpaid interest to the redemption date.
Strong cash generation from operations in recent quarters has enabled Eaton to undertake the redemption to cut future interest expense. The redemption will mean a nine cents-a-share charge to earnings in the first quarter. Eaton makes "highly" engineered products for the automotive, industrial, commercial and military markets.
In secondary trading, spreads on high-grade bonds ended a quiet day uncharged.
"We're just tracking Treasuries," one trader said, adding that it was typically slow Monday. Highyield bonds ended flat to up 1/8.
New Issues
Federal Home Loan Mortgage Corp. issued $200 million of 4.58% notes, due 1996. Noncallable for a year, the notes were priced initially at par to yield 23 basis points over comparable Treasuries. Goldman, Sachs & Co. was the sole manager of the offering.
Federal Home Loan Mortgage Corp. issued $100 million of 4.07% debentures, due 1995, at par. Noncallable for a year, the debentures were priced to yield 10.5 basis points over comparable Treasuries. Lehman Brothers was the sole manager of the offering.
Federal Farm Credit Bank issued $100 million of 4.25% step-up medium-term notes due, 1996. They were priced at par to yield 97 basis points more than the one-year Treasury bill. Thye notes are noncallable for a year, after which the coupon steps up to 5.90%. Merrill Lynch managed the offering.
Diamond Shamrock issued $100 million of 8% debentures, due 2023. Noncallable for years, the debentures were priced at 99.605 to yield 8.035% or 124 basis points more than comparable Treasuries. Moody's rates the offering Baa2, while Standard & Poor's rates it BBB. Lehman Brothers was lead manager for the offering.
Rating News
Duff & Phelps Credit Rating Co. has downgraded Delta Air Lines Inc.s' equipment pass-through and leveraged lease certificates to BBB-minus from BBB-plus, senior unsecured debt to BB from BB-plus, and preferred stock to B-plus from BB-minus.
The actions over about $2.4 billion of debt.
"Our rating action reflects the continuing deterioration in Delta's profitability and cash flow," Duff & Phelps said in a release, "Credit protection measures continue to decline due to weakness in the domestic economy and price cutting, the result of excess capacity and financial difficulties of certain carriers."
