REVCO TO PAY TRADE CREDITORS AN ADDITIONAL $3.5 MIL.
REVCO TO PAY TRADE CREDITORS AN ADDITIONAL $3.5 MIL. in cash under a newly-revised Chapter 11 reorganization plan announced by the firm April 20. The funds will be distributed on a pro rated basis according to claim size. Major Revco trade creditors include Revlon, Merck, Bindley Western and American Greetings. In return for the payments, Revco trade creditors have agreed not to pursue remuneration litigation against Revco founder Sidney Dworkin, his son Mark Dworkin and former President William Edwards. The litigation relates to the recovery of stock and asset transfers and payments made by Revco and holding company Anac to the three officers in connection with their resignation in 1987. Trade creditors were to receive rights to this suit under the unrevised version of the Revco plan. The additional $3.5 mil. is a relatively small increase over the roughly $85.9 mil. (in cash or at the base value of the stock) trade creditors already have been allocated under the reorganization plan. Trade creditors are to receive $474.33 in cash or new common stock for every $1,000 of the total $181 mil. claimed. Most trade creditors opted to receive payment in cash rather than stock, according to Revco. The three classes of noteholders representing $707.5 mil. in claims generally have opted for stock, Revco said. Sidney Dworkin and Edwards have agreed to withdraw appeals to the Revco plan of reorganization, clearing the way for the plan's implementation following approval by an Akron, Ohio federal bankruptcy court. Revco said it expects to emerge from bankruptcy in late May. In addition to withdrawing their appeals of the plan, Dworkin and Edwards have agreed not to seek any rights to indemnification by Revco from the litigation regarding compensation received upon their resignation. In the plan, Revco had released the former officers, as well as Revco's investment firm Salomon Brothers, from all legal action stemming from a 1986 management-led leveraged buyout of the firm. To raise the $3.5-mil., Revco will increase its rights offering by 468,541 to a total of 1.5 mil. rights that are exchangable for one share of new common stock, each priced at $7.47. Of the 1.5 mil. rights, 1.4 mil. are to be offered to subordinated debt holders. The Zell/Chilmark Fund will purchase shares for which rights are not exercised by the subordinated debt holders. Zell/Chilmark, which financed the reorganization plan, is gaining two seats on the Twinsburg, Ohio-based Revco board and an 18.4% interest in the drug chain. Proceeds from 1 mil. rights will be used for a payment of $7.5 mil. to Jack Eckerd Corporation, as part of an agreement announced Feb. 13 under which Eckerd put its plan of reorganization for Revco on hold. The Revco plan was cleared by bankruptcy court March 11 ("The Pink Sheet" March 16, T&G-13) but could not be implemented until the appeals were resolved.
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