Talks break down on taking stock in exchange for debt Creditors act to force Greyhound into bankruptcy

November 04, 1994|By Timothy J. Mullaney | Timothy J. Mullaney,Sun Staff Writer

Creditors of Greyhound Bus Lines Inc. attempted to force the nation's biggest bus company into bankruptcy in Texas late Wednesday, following a breakdown in talks at a Saturday confrontation at the offices of Greyhound's bankruptcy lawyers in New York.

The move capped a colorful week of high-wire talks and a week of high-profile embarrassments and scrambling for Greyhound, which only emerged from its last Chapter 11 bankruptcy proceeding in 1991.

In the past few weeks, the company had been forced to ask bondholders to accept stock in exchange for debt and to replace its chief executive after reporting a loss of $72 million in the first nine months of the year.

In a statement yesterday, Greyhound said the filing had no immediate impact on its operations or finances. The company said it does not plan to ask for bankruptcy protection itself and would fight the bondholders.

Chriss Street, a money manager in Corona del Mar, Calif., whose clients own almost $25 million of Greyhound's $98.9 million in convertible debentures, filed the involuntary bankruptcy petition

in U.S. Bankruptcy Court in Dallas.

A person who said he spoke with Mr. Street said he was told that Mr. Street acted after being called a "pest" at a showdown Saturday at the law offices of Weil, Gotshal & Manges, and partly out of fear that Greyhound would file its own bankruptcy action in Delaware, where bankruptcy courts are believed to be friendlier to corporate managements.

"This is about money they owe me," Mr. Street said yesterday. Greyhound missed a $4.2 million debt payment to the bondholders on Sept. 23. "It was apparent that from the negotiating session that it was impossible in light of the company's position" to reach agreement.

Bondholders want 55 percent of the company in return for wiping out the convertible debt. The company has offered 32 percent, according to Bloomberg Business News.

Greyhound stock closed yesterday at $1.875 a share, down 62.5 cents, on the American Stock Exchange.

Bondholders had previously filed a lawsuit in federal court in Texas alleging Greyhound officials committed securities fraud in HTC failing to disclose problems at the company. Yesterday, a shareholder filed another securities fraud claim in Delaware.

But Greyhound spokesman Bill Kula said he knew of no plan to file for bankruptcy in Delaware.

"We're going to explore every option," he said. He insisted the reservation system was working well.

Greyhound's biggest stockholder also called Mr. Street's move a mistake.

"We asked the bondholders to meet us halfway and we're the bad guys," said Gerald R. Connor, president of the Toronto money management firm of Connor, Clark & Co., which owns 18 percent of Greyhound. "Now we're going to get beat up. It's the American way."

Under bankruptcy law, the stockholders would be at the end of the line to get paid if Greyhound is forced to reorganize.

Mr. Connor insisted that management has made progress in turning the company around, hiring Craig R. Lentzsch, former Greyhound executive vice president, as chief executive effective Nov. 15 and lining up a new source of short-term financing.

Robert Schwarz, executive vice president of Peter Pan Bus Lines Inc., the nation's second-biggest bus line and the only other intercity carrier serving Baltimore, said yesterday that his company was prepared to expand service in Baltimore if Greyhound was forced to cut back. The Massachusetts company, however, only serves the northeastern states.

Peter Pan, with $40 million in annual revenues, is dwarfed by Greyhound's $682 million last year. Greyhound is the only

nationwide bus carrier.

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