BOISE, Idaho - Financially beleaguered Washington Group International filed for federal bankruptcy protection on Monday under a plan already endorsed by the 97 banks that have lent it $560 million.
Trading in the Boise-based construction and engineering company was suspended immediately on the New York Stock Exchange, Washington Group President Steven Hanks said, and the company was delisted. The stock, which had been over $12 a share during the past year, closed last Friday at $1.03.
While Hanks said lenders and unsecured creditors will be covered by the debt-for-equity plan filed in U.S. Bankruptcy Court in Reno, there was unlikely to be any recovery for the common stock shareholders. That includes Missoula industrialist Dennis Washington, who held 38 percent of the corporation.
Washington Group International is part of the financial empire Washington built. In 1996, it rescued one-time international construction giant Morrison Knudsen from bankruptcy.
Washington Group is separate from the Washington Corp. group of companies located in Missoula. Washington Group has been on the brink of bankruptcy for the past two months since it lodged fraud claims against Raytheon Co. in conjunction with last year's purchase of Raytheon Engineers & Constructors.
The deal involved Washington Group paying $53 million in cash and assuming what was estimated at the time as $450 million in liabilities. But Washington Group said the actual debt totaled $700 million, a fact it claims Raytheon intentionally tried to hide.
Raytheon has denied any impropriety.
Washington Group's suit is pending in state court in Boise, and the Securities and Exchange Commission has also begun looking into the transaction.
Before leaving Boise to appear at the initial bankruptcy court proceeding in Nevada, Hanks called Washington Group "a great organization today, and it will be a great organization in the future."
"We are in the process of returning this company to financial viability," Hanks said. "We have made business development a top priority during the pendency of the restructuring process and expect to continue securing new contracts."
Under the deal, the bank creditors will take over the estimated $500 million in corporate equity with the rest of the outstanding debt expected to be covered by damages secured from Raytheon in the lawsuit.
The restructuring plan sets up a special trust to purse that litigation. The unsecured creditors will be paid under a debtor-in-possession agreement of up to $350 million from a group of lenders led by Credit Suisse First Boston.
"We expect things to go forward on a business-as-usual basis at the project level," Hanks said.
No office shutdowns or major layoffs are planned, Hanks said, but he acknowledged that it will be more difficult than normal for the company to secure business during the six months he anticipates the Bankruptcy Court-protected restructuring to take.