Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, April 17, 1990 TAG: 9004170070
SECTION: BUSINESS PAGE: A5 EDITION: METRO
SOURCE: GEORGE KEGLEY BUSINESS EDITOR
DATELINE: LENGTH: Medium
Nautilus, a worldwide supplier of exercise equipment made in Grayson County, reported debt of $38.6 million and assets of $27.3 million when it filed for Chapter 11 reorganization in late February.
Of dozens of prospective buyers, an English company agreed to pay $24 million and a group assembled by a Southern investment banking house bid $18.5 million, but both offers later were withdrawn, said L.E. Creel, Nautilus' lawyer.
Creel estimated that the business will sell for $15 million to $18 million, less than half the amount owed. As the price goes down, the benefit to creditors at the bottom of the ladder will shrink, he said.
Sales of the equipment made in Independence had dropped to $1 million a month before the court filing in February but rose recently to almost $2 million a month and the order backlog is approaching $5 million, Creel told the hearing.
Reorganization under court protection is doing what it is supposed to do, he said, by giving the company breathing time while stabilizing its operations.
Of the total debt, $27.5 million is owed two major secured creditors, Meritor Savings Bank and Prudential Insurance Co. In an unusual step, Meritor, the largest creditor, has agreed to continue financing Nautilus with a new line of credit.
Creel said a major intangible asset of the company is its trade name. He said a national survey found Nautilus among the top three names recognized; the others were Coca-Cola and Kleenex. He did not give a source for that information.
Ward International, owner of Nautilus, decided last year to sell or liquidate it. Both companies are owned by Travis Ward of Dallas.
What Nautilus needs is capital, Creel said. "There is nothing wrong with the market but the company has an enormous debt load."
If the company were liquidated and the trade name lost, it probably would not bring enough money to pay off the first liens, he said.
When the company is sold, he said, both Meritor and Prudential have "graciously agreed" to share part of the purchase price with unsecured creditors. Distributors have "a number of enormous claims."
More than 700 creditors have filed with the court. After paying Meritor and Prudential, the reorganization plan proposes full payments to trade creditors and 25 percent for general claims.
All creditors would like to share in the pot, Creel said, but the pot probably won't equal the amount of debt owed to the institutions that have been financing the company.
Since the sale has not yet been negotiated, a Bankruptcy Court hearing on the disclosure plan has been postponed until June 20.
by CNB