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Sunbeam debt issue delayed
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June 17, 1998: 9:45 a.m. ET
Morgan Stanley said to defer $1.7B loan syndication amid Sunbeam turmoil
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NEW YORK (CNNfn) - Plans by Morgan Stanley Dean Witter & Co. to sell part of $1.7 billion in loans it helped to underwrite in March for ailing appliance maker Sunbeam Co. are likely to run into major delays, according to a published report Wednesday.
The postponement of the loan syndication came after Sunbeam's directors ousted the company's maverick Chief Executive Albert Dunlap Monday, citing "lost confidence" in his ability to remedy the firm's financial woes.
Dunlap, whose downsizing recipe of massive layoffs and draconian cost cutting earned him the sobriquet 'Chainsaw Al,' was recruited to turn Sunbeam around in 1996. Despite signs of early success, Sunbeam's stock price had slumped dramatically since March, amid concerns that Dunlap's antidotes were proving to be placebos.
Morgan Stanley's decision to postpone the loan syndication, underwritten with co-agents BankAmerica Corp. and First Union Corp., apparently was prompted by concerns over Sunbeam's financial predicament, the Wall Street Journal reported Wednesday.
At a meeting at New York's Waldorf-Astoria June 9, the Journal wrote, Morgan Stanley and its agents encountered skepticism when they tried to farm out portions of the loans to banks and institutional investors.
A day earlier, an article in the business weekly Barron's alleged that a large share of Sunbeam's earnings in 1997 stemmed from questionable accounting practices. Sunbeam adamantly denied the charges. But the article apparently unsettled the financial community.
Institutional investors reportedly are angry at Morgan Stanley for the collapse of the $2 billion issue of zero-coupon convertible subordinated bonds that the investment house underwrote. Those bonds traded Tuesday at 24, down from 37.243 at the time of issue.
Sunbeam sought Morgan Stanley's underwriting services in March as part of a broad debt restructuring related to the firm's acquisition of three durable goods makers - Coleman Co., First Alert Inc. and Signature Brands USA Inc.
Morgan Stanley holds 40 percent of the loans while each of the agents holds 30 percent, the Journal wrote.
Moody's Investor Services Tuesday assigned a Caa2 rating to the Sunbeam debt issue and assessed the ratings outlook as "negative."
Meanwhile, Michael Price, a manager at Franklin Mutual Series Fund Inc., which holds a 17.4 percent equity stake in Sunbeam, apparently has weathered the company's financial turmoil in fine shape. That stake was worth $243 million Tuesday, up from Price's original investment of $60 million, though less than a third of its March value, the Journal reported.
Sunbeam (SOC) shares ended down 1-7/8 at 13-7/8 in composite trading Tuesday on the New York Stock Exchange.
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