Memorex Telex files petition for bankruptcy

January 07, 1992|By Michael Dresser

Memorex Telex N.V., a troubled multinational computer company that was stitched together by Orioles owner Eli S. Jacobs, filed a previously announced prepackaged Chapter 11 plan yesterday -- a move that could hasten its progress through the bankruptcy process.

The filing in U.S. District Court in Wilmington, Del., came as no surprise. In July, Memorex Telex reached a deal with its bondholders that effectively stripped Mr. Jacobs of any significant interest in the company. Memorex said yesterday that its reorganization plan had received approval from at least 85 percent of its creditors.

A prepackaged bankruptcy, in which the debtor's creditors come to an agreement before papers are filed, can cut the length of time a company's finances remain under court supervision from years to months.

According to earlier reports in the Wall Street Journal, the plan would cut Mr. Jacobs' 35 percent stake in the company to 1.8 percent. There is no indication the plan will have any effect on Mr. Jacobs' position with regard to the Orioles.

Mr. Jacobs has been the subject of a number of articles in local and national publications questioning the state of his corporate finances, but he has steadily denied he faces any serious problems.

In fact, last month he scored a financial coup in a deal involving Systemix, a small Palo Alto, Calif., biotechnology firm in which Mr. Jacobs invested $8 million three years ago.

A majority stake in the firm was sold to Sandoz Ltd. for $392 million in a deal the San Francisco Chronicle called "a grand slam."

David J. Faulkner, vice chairman and chief financial officer of Memorex Telex, said the bankruptcy plan would reduce the company's $1.3 billion in debts by about $550 million. Memorex Telex also received court approval yesterday to receive about $85 million allotted under the plan.

"We look forward to emerging from this phase a revitalized and recapitalized company, well positioned to take advantage of our considerable operating strengths," Mr. Faulkner said in a statement.

Dutch-based Memorex Telex was created in 1987 when Memorex, which had been acquired by a group led by Mr. Jacobs in a leveraged buyout from Unisys Inc. two years earlier, bought Telex for a reported price of about $800 million.

Almost from the beginning, the merged company was in trouble -- burdened with heavy debts from the buyouts and squeezed by a contracting market for its disk drives and other computer equipment.

For the year that ended March 31, Memorex Telex lost $270 million on revenue of $1.87 billion, and in July the company suspended payments to its banks and bondholders.

Although Mr. Jacobs may have had to forgo some potential profits because of Memorex Telex's problems, his losses will be limited because his personal investment in the company was never too large.

Memorex Telex's American operations are based in Tulsa, Okla., but the company has announced plans to move its base to Dallas as part of the restructuring plan. Memorex Telex has no present connection with Memorex audio tape, because Memorex sold the division that makes the product it was best known for to Tandy Corp. in 1982.

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