A widening criminal investigation in Kuwait has cast a shadow over CK Acquisition Corp.'s buyout plan for bankrupt Circle K Corp., a spokesman for bondholders' attorneys said yesterday.
Circle K bondholders, who have opposed CK Acquisitions' plan from the start, yesterday filed a motion in a Phoenix bankruptcy court seeking more disclosure concerning Sheik Ali Khalifa al-Sabah, one of CK Acquisition's stockholders, according to a spokesman for Anderson Kill Olick & Oshinsky. The firm represents the official bondholders' committee.
Bondholders filed their own reorganization plan in October, he said. Circle K, which had originally promised bondholders a 20% equity stake in the reorganized company, now advances the CK Acquisitions plan, which the spokesman said would leave bondholders with no equity and no "virtually no recovery."
Circle K's bondholders yesterday also asked the court to delay a mailing scheduled for today to creditors of disclosure statements and plans of reorganizations for the two competing plans until more is known about the events surrounding a pending lawsuit in Kuwait. That would essentially delay voting on the plans, the Anderson spokesman said.
The scandal, gleaned from news accounts, involves a lawsuit brought last week by the new management of the Kuwaiti investment Office and $5 billion that is missing.
CK Acquisition wants to buy Circle K for $400 million under a reorganization plan. The group's other major stockholder is Investcorp, an investment bank entity with strong links to the Arab world, according to an Anderson Kill news release.
Khalifa, Kuwait's former minister of oil, also served as minister of finance during the Kuwaiti invasion. Bondholders have cited news accounts that Khalifa and his first cousin, Sheik Fahad al-Rashid, ran the Kuwaiti Investment Office over the past two years, the release says.
Also, Fahad and another man, Javier de la Rosa, were the Kuwaiti Investment Office's executives in charge of Grupo Torras, S.A., the office's Spanish investment arm. De la Rosa, through a company he controlled, was a CK Acquisition stockholder until he left in December and also dropped out of CK Acquisition's bid for Circle K.
In their quest for more information, the bondholders have pointed to news accounts that name de la Rosa and Fahad as among seven defendants charged with criminal misconduct for mismanaging Grupo Torras, which is missing approximately $5 billion.
The Kuwaiti lawsuit calls for freezing assets of de la Rosa, Fahad and others.
In separate legal proceedings by Kuwaiti authorities begun last week, the assets of Fahad and three others are being seized. The government also said it is moving to seize their relatives' assets. Bondholders fear that Khalifa's own assets may be taken, because he is a first cousin of Fahad. Consequently, he may be unable to remain in the CK Acquisition group and satisfy his funding commitments to the Circle K deal, the Anderson Kill release says.
Elsewhere yesterday, new issues exploded past $4 billion, with Hydro-Quebec and Hanson Overseas B.V. leading the charge. According to Richard duBusc, managing director at First Boston Corp. which served as lead underwriter on the Hanson deal. the offering marks the largest corporate Yankee bond deal ever.
"A broad array of investors" purchased the offering, which was completely sold upon pricing, duBusc said. Strong demand pushed the deal to $1.25 billion, the maximum under its shelf registration, from $850 million.
"We were pleased it did this well," duBusc said. Asked whether the appearance of Hydro-Quebec's offering prompted concern, he said it didn't because they are different deals and their success proves the market demand for quality 10-year paper is deep.
Proceeds from Hanson's offering, which is guaranteed by Hanson PLC, will be used for working capital, capital expenditures, and general corporate purposes, including debt repayment, duBusc said.
In secondary trading, high-grades performed well despite the new-issue blast. Spread tightening continued, notably in the lesser credits as buyers reached for yield, he said. He also said Hydro-Quebec's deal sold well.
High-yield bonds finished stronger, gaining as much as 1/2 point in the single-B sector.
New Issues
Hydro-Quebec's $1.5 billion deal consisted of $500 million of 7.375% debentures due 2003 at par. The noncallable debentures were priced to yield 75 basts points over 10 year Treasuries. The second consisted of $1 billion of 8% debentures due 2013. The noncallable debentures were priced at 99.486 to yield 8.052% or 65 basis points over 30-year Treasuries. Moody's rates the offering Aa3, while Standard & Poor's rates it AA-minus. Merrill Lynch lead managed the offering.
Hanson Overseas issued a two-part offering totaling $1.25 billion. The first tranche consisted of $500 million of 5.50% notes due 1996. The noncallable notes were priced at 99.749 to yield 5.592% or 70 basis points over comparable Treasuries. The second trance consisted of $750 million of 7.375% notes due 2003. The noncallable notes were priced at 99.468 to yield 7.45 1 % or 80 basis points over comparable Treasuries. Moody's rates the offering Al, while Standard & Poor's rates it A-plus.
Pepsico issued $300 million of 6.125% notes due 1998. The noncallable notes were priced at 99.306 to yield 6.289% or 40 basis points over comparable Treasuries. Moody's rates the offering Al, while Standard & Poor's rates it A. Lehman Brothers managed the offering.
Bergen Brunswig Corp. issued a two-part offering totaling $250 million. The first tranche consisted of $100 million of 5.625% notes due 1996. The noncallable notes were priced at 99.83 to yield 5.687% or 78 basis points over comparable Treasuries. The second place consisted of $150 million of 7.375% notes due 2003. The noncallable notes were priced at 99.26 to yield 7.481% or 83 basis points over comparable Treasuries. Moody's rates the offering Baa 1, while Standard & Poor's rates it A-minus. Merrill Lynch & Co. managed the offering.
First Chicago Corp. issued $200 million of 7.625% subordinated notes due 2003. The noncallable notes were priced at 99.55 to yield 7.69% or 102 basis points over comparable Treasuries. Salomon Brothers managed the offering. Moody's rates it Baa-2, while Standand & Poor's rates it A-minus.
Chemical Banking Corp. issued $200 million of 7.625% subordinated notes due 2003. The noncallable notes were priced at 99.852 to yield 7.646% or 100 basis points over comparable Treasuries.
