Spokesman says action won't affect industrialist's Missoula-based holdings
Financially beleaguered Washington Group International filed for federal bankruptcy protection Monday under a plan already endorsed by the 97 banks that have loaned it $560 million.
Trading in the Boise-based construction and engineering company was suspended immediately on the New York Stock Exchange, Washington Group International president Steven Hanks said, and the company was delisted. The stock, which had traded at 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, Nev., 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 that Washington built. In 1996, it rescued one-time international construction giant Morrison Knudsen from bankruptcy.
The bankruptcy filing will have no effect on Washington's other Missoula-based holdings, which under the name Washington Companies include Washington Corp., Montana Rail Link, Envirocon Inc. and Montana Resources.
"They are totally separate," said Russ Ritter, the director of corporate and government relations for Washington Corp., which oversees the infrastructure of the other Washington Companies holdings. "Washington Group International is a publicly traded company. Washington Companies are companies Dennis Washington or his family own or have controlling interest in."
Ritter said the bankruptcy also will have no effect on Washington's holdings in Canada.
Since news of the possible bankruptcy of Washington Group International surfaced about two months ago, Ritter said there has been some confusion over how it would affect Washington's other holdings.
"The emotion of hearing about bankruptcy sometimes leads the mind to jump all over," Ritter said. "We've had people saying Montana Rail Link is going to fold. But that's not going to happen. … It has nothing to do with any of those other companies."
Washington Group has been on the brink of bankruptcy during 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 has 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, 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.
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.