REVCO REORGANIZATION PLAN CONFIRMED BY BANKRUPTCY COURT
REVCO REORGANIZATION PLAN CONFIRMED BY BANKRUPTCY COURT in Akron, Ohio at a March 11 hearing. The Twinsburg, Ohio-based chain expects the plan, which will take Revco out of bankruptcy, to go into effect four to six weeks after the finalization of the court order. Signed on March 13, the order will become final on March 23 if no appeal is introduced. Revco, and holding company Anac filed for Chapter 11 protection in July 1988. Creditor groups representing 99.74% of claims voted in favor of the plan. Approximately half of the trade creditors chose Revco's cash option rather than credit. The plan is being financed by Zell/Chilmark, which will gain two seats on Revco's board and an 18.4% interest in the drug store chain. Cash paid out by Zell/Chilmark to Revco creditors will be less than $50 mil. Noteholders will elect six board members and trade creditors will name one. Revco Chairman and CEO Boake Sells and Exec VP-Finance and Chief Financial Officer Gregory Raven will remain on the board. Revco currently has debt of $430 mil., compared to $1.5 bil. when the company declared bankruptcy. Revco's $1.5 mil. debt when it entered Chapter 11 included $700 mil. associated with a 1986 management-led buyout. The Revco plan includes a release of all fraudulent conveyance litigation and all legal action against Salomon Brothers, which was involved in the LBO. The option to litigate against three of Revco's former execs -- founder Sidney Dworkin, his son Mark Dworkin and former Revco President William Edwards -- would be granted to the trade creditors' committee. Sells commented that the period spent in bankruptcy has been "useful in that [Revco has] created a highly efficient machine for a very competetive industry." Revco noted that its "new marketing strategies and systems technology" contributed to the "strongest" third quarter and nine months results since it filed for bankruptcy. Revco posted an 11.9% sales gain to $522.9 mil. in the third quarter of FY 1992 (ended Feb. 8). Net income was $16.2 mil., compared to a $12.7 mil. net loss in third quarter fiscal 1991. Operating profit increased more than five-fold to $18 mil. in the quarter. For the nine months, Revco sales rose 10.2% to $1.43 bil. The company's net loss of $8.3 mil. was lower than the $62.2 mil. net loss reported in the comparable period. Operating profit was $24.2 mil. for the period, compared to a $13.9 mil. operating loss a year ago. No borrowings were made under Revco's $80 mil. debtor-in- possession credit in the nine month period. Cash reserves remain at $158 mil., "more than adequate to allow Revco to fund the plan of reorganization," the company said. Revco modified its plan of reorganization at the beginning of the year after three other plans failed to gain acceptance by all creditor groups. Two of those plans proposed acquisition of Revco by competitors Eckerd and Rite Aid; both of those efforts fell through. Eckerd acquired 220 Revco outlets in a streamlining move by the bankrupt chain in 1990.
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