Parks' sale price bitten by fees, taxes More than a fourth of $1.7 million cost will be consumed

July 20, 1996|By Sean Somerville | Sean Somerville,SUN STAFF

If Parks Sausage Co. is sold to Franco Harris, back property taxes and lawyers' fees will consume more than one-fourth of the $1.7 million purchase price, lawyers said yesterday at a meeting of creditors.

That would leave a maximum of about $1.2 million to pay roughly 500 creditors whose $2.4 million in debt is not secured by collateral. Those unsecured creditors include Parks Chairman Raymond V. Haysbert Sr., who will try to get back part of a $200,000 loan he made to the company.

Mark Friedman, a lawyer for the company, estimated that the unsecured creditors would receive between 25 cents and 50 cents on the dollar.

"Probably more toward the lower end," he said.

Parks filed for Chapter 11 bankruptcy protection as part of a deal to sell the company to Harris, a Pittsburgh businessman and former football star.

A federal bankruptcy judge is scheduled to rule on the sale Wednesday.

The creditors' meeting was held by the Office of the U.S. Trustee as a precursor to Wednesday's hearing. Roughly 15 people attended, including lawyers, accountants and Parks executives.

The meeting did not include the largest holders of debt secured by collateral -- the city of Baltimore, NationsBank and Baltimore Development Corp., the city's economic development agency.

Together, the secured creditors will forgive more than half of $8.2 million in debt as part of the deal.

If the deal is approved, Harris' company, Parks LLC, will assume about $3.8 million in debt to the three creditors. Parks LLC also will pay the $1.7 million purchase price.

The city will take $171,000 of the $1.7 million for back property taxes. Friedman estimated the cost of lawyers, accountants and other professionals employed by the debtor and the creditor were between $300,000 and $400,000.

He said the administrative costs get the highest priority in bankruptcy cases. Friedman also said the expenses were relatively low because of a rush to close the sale. Parks closed its doors May 24 and sought bankruptcy protection last month.

"In bankruptcy cases, time is truly money," he said.

The pot of money for unsecured creditors may shrink below $1.2 million because Parks may have to contribute an unknown amount of money to a pension fund, Friedman said.

The largest of the unsecured creditors is Baltimore Gas & Electric Co., which is owed $505,382.

Steven F. Fruin, an attorney for the unsecured creditors, said he was not sure whether they would object to the sale. "It's too early to tell," he said.

One of the creditors not represented by Fruin is Haysbert.

As part of the sales deal, the chairman and his son, Reginald, the company's president, would serve as consultants to the company and get 6 percent of its stock.

Raymond Haysbert would work 15 hours a week over seven years. In return, he would get $50,000 -- $25,000 this year and $25,000 next year. He also would get 0.5 percent of Parks' gross revenues over the next seven years, but not more than $110,000 annually.

If unsecured creditors get 25 cents on the dollar, Haysbert also would receive $50,000 from the $1.7 million purchase price.

Friedman said Haysbert had sacrificed a lot more over several years as an executive than he was seeking. He lent the company money on several other occasions and bought one of its buildings at an inflated price to pump cash into Parks.

For many years, he received a salary of $35,000, very low for an executive of a company as large as Parks, Friedman said.

Pub Date: 7/20/96

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