Revco proposals: control is the key

Drug Store News, Oct 9, 1989

Revco proposals: control is the key

CLEVELAND -- Bondholders and D.S. Partners, Revco's primary equityholder, are far apart on a reorganization plan for the bankrupt chain, including who should control the giant retailer, sources said a proposed reorganization plan indicates.

Revco's preliminary proposal was being circulated among involved parties at press time.

D.S. Partners, which owns 60 percent of Revco common shares, has proposed to invest $150 million and own 55 percent of new Revco shares that would be issued after the old ones are cancelled, a source confirmed.

Bondholders and trade creditors would receive the remaining 45 percent of the new shares, and bondholders would also get some new bonds, in a package for the bondholders valued at about 25 cents to the dollar, the preliminary plan states.

Arguing they deserve a large piece of a reorganized Revco, since they invested $760 million in junk bonds in the chain's 1986 leveraged buyout, the bondholders are ready to bet Revco shares will gain value.

In their counterplan, bondholders would invest $75 million -- half the amount D.S. Partners proposes -- and in turn receive 94 percent of common shares; D.S. Partners would receive less than one percent.

At press time, the Federal Bankruptcy Court in Ohio was set to rule Oct. 2 on a noteholders' motion to question members of the board of directors on their plan.