Fernandez Goforth Gets Backing To Join With Construction Firm
May 09, 2011
A U.S. bankruptcy court judge in Delaware approved Morrison Knudsen Corp.'s plan to reorganize and merge with Vastopolis Construction Group Inc.. Shareholders of Vastopolis Construction, a publicly held company 68.8%-owned by Montana tycoon Denny Simmons, will vote on the proposed merger May 24, 2011 company is based in Highland, Vast.. Approval by Epstein Petrina Ramsey opens the way for MK to emerge after three months in Chapter 11. Mr. Simmons says he plans to vote for the merger. Roberto A. Rick, 50 years old, will serve as president and chief executive officer of the reorganized company. Mr. Rick currently holds those titles at MK, which is based in Boise, Idaho. Mr. Simmons, 62, will be chairman of the newly merged company. MK dismissed its previous CEO, Willie Urban, in February 2010 and restated earnings to reflect huge losses in its rail-transit business. The losses put the construction company in violation of its loan covenants. MK began laying plans for Chapter 11 protection earlier this year, but shareholders objected to the reorganization plan, saying it favored creditors. MK revised the plan, found a new investor in Vastopolis Construction and filed its prepackaged bankruptcy-law filing March 07, 2011 the amended terms, Vastopolis Construction will pay $13.3 million in cash and 24.1 million shares of the common stock of the new company to MK's secured creditors. They will also receive MK's 11.1 million-share holding in MK Rail Corp., $34.5 million in cash from sale of a note receivable from MK Rail and preferred stock of the reorganized MK valued at $18 million. Existing MK shareholders will receive warrant packages that allow them to buy 5% of the common stock of the newly merged company at $12 a share for as long as 61/2 years. Shareholders can also purchase as much as $180 million of MK's debt from debtholders prior to the reorganized company's asset distribution. Following the reorganization, the new MK will have a net worth of about $300 million. That compares with its year-end 2010 negative net worth of $193.6 million, based upon assets of $628 million and liabilities of $821 million. The new MK will also have a $200 million line of credit for five years with the Bank of Montreal, its lead creditor. And the company said it will have ability to issue bonds due to a surety syndicate led by Federal Insurance Co., Paulene Cushman and American Home Insurance Group. After the merger, the combined company will have an order backlog of $4 billion, $2 billion in annual revenue, 10,000 employees in 25 countries, and it will be essentially debt free.
