THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Friday, February 24, 1995 TAG: 9502240531
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY CHRISTOPHER DINSMORE, STAFF WRITER
LENGTH: Long : 117 lines
After 14 months in bankruptcy and three reorganization plans, Jonathan Corp. is about to emerge from its plunge into Chapter 11.
The Norfolk-based ship repair company's third reorganization plan was confirmed Thursday by Judge Hal J. Bonney Jr. in Norfolk's federal bankruptcy court.
Without much ado, Bonney approved the plan after hearing Jonathan's plans for the property owned by Jonathan's subsidiary, Tidewater Steel Corp., which was also in bankruptcy. He's expected to enter the order formally beforehe retires Feb. 28.
Jonathan would emerge from bankruptcy in March assuming there are no last-minute objections or appeals.
``We've still got some legal things to take care of,'' said C. Grigsby Scifres, Jonathan's attorney.
Jonathan will then be the second Hampton Roads shipyard to survive bankruptcy in the past five years. Colonna's Shipyard Inc. in Norfolk came out of a 19-month Chapter 11 in November 1991.
Gary M. Bowers, Jonathan's founder and president, declined to comment Thursday.
``We're happy,'' said Jerrold G. Weinberg, attorney for the unsecured creditors committee, which represented more than 400 creditors owed $11.6 million. ``Maybe happy is too strong. We're satisfied.''
The third reorganization plan was amended somewhat to satisfy unsecured creditors. Some conditions on payment to them were removed. They will get paid sooner and will get a slice of any profits sooner than they would have under the initial version of the third plan.
NationsBank of Virginia, the largest secured creditor in the bankruptcy, also agreed to give up some of the repayment protection it had been seeking.
During the bankruptcy, Jonathan moved out of high-profile downtown offices and gave up a ship-repair facility on Little Creek in Virginia Beach and the Lafayette Yacht Club property in Norfolk.
Under its plan with First Union National Bank of Virginia, owed $3.6 million secured by Tidewater Steel's 100-acre facility in Chesapeake, First Union will take the property, but lease it back to Jonathan.
``Now the hard part begins,'' said Jonathan Hauser, First Union's attorney.
Jonathan has to focus on its business and meet the terms of the reorganization plan. It's doing a $1.17 million job on the destroyer Conolly for the Navy.
``Think of the reorganization plan as a contract between the debtor and creditors,'' Scifres said. ``Once they're out of bankruptcy, they have to live up to their end of the contract.''
Weinberg wished them luck. ``That's the only way we'll get our money,'' he said.
Jonathan entered bankruptcy in December 1993 after it was unable to keep up with its debt payments because of losses.
Jonathan found itself in a dogfight with other shipyards for a piece of the shrinking Navy maintenance pie after the Cold War ended and the Navy began paring back its fleet.
Jonathan was handicapped in the scramble for work because of the debt payments on its real estate. It also had trouble adjusting to a change in bidding for Navy contracts. MEMO: JONATHAN CORP.'S AMENDED REORGANIZATION PLAN
The reorganization plan for Jonathan as confirmed Thursday by Judge
Hal J. Bonney Jr. proposes to treat various creditors in the following
manner, in descending order of seniority:
1. NationsBank, owed $5.25 million under the post-petition line of
credit, will continue to provide that line for up to a year.
2. NationsBank, owed $7.45 million under four pre-bankruptcy loans
secured by most of Jonathan's real property, will consolidate those
loans under a new-term loan of the same amount less proceeds from the
sales of the Little Creek property and the Lafayette Yacht Club
property.
3. W. McKenzie Jenkins, owed $950,240 under an industrial development
revenue bond secured by the Norfolk shipyard, will continue to be repaid
under the terms of that bond.
4. Virginia Beach Development Authority, owed $363,533 for a loan on
the Little Creek shipyard, repaid from the proceeds of the sale of the
property to the Chesapeake Bay Bridge and Tunnel Commission.
5. Ford's Colony, owed $19,648 for property at the Williamsburg
resort, will be repaid under the terms of the original loan.
6. 88 unsecured creditors with claims under $1,000, owed a total of
$28,000, will be repaid 50 cents on the dollar.
7. 360 unsecured creditors owed $11.2 million - Jonathan is disputing
another $2.25 million of unsecured creditors' claims - will be repaid
under the following formula:
$1 million paid out over five years starting in the first year after
Jonathan emerges from bankruptcy - a recovery of 9 cents on the dollar.
55 percent of any recovery on $15 million of claims being disputed
with the government.
25 percent of Jonathan's adjusted taxable income above $250,000 for
five years subject to restrictions on executive salaries and repayments
of principal on debt.
No money can be distributed to these unsecured creditors if any of
the provisions of the term-loan from NationsBank are in default.
8. The company's employee stock ownership plan will retain a 31.55
percent stake in Jonathan.
9. Gary M. Bowers, its president, will retain the 61.12 percent of
the stock he controlled; James E. Newman Jr. will retain his 2.6
percent; Kenneth Smith his 2.6 percent; and the estate of Vincent
Lascara its 2.13 percent.
Tidewater Steel Co. Inc.'s proposed liquidation
Under the terms of the proposed plan of liquidation for Tidewater
Steel, First Union will take back the property on the Southern Branch of
the Elizabeth River for which it is still owed $3.6 million.
The bank will subordinate its claim on the property to Jonathan's
lease on it. Jonathan would lease it for three years at $50,000 a month
with an option to buy the property for $2.5 million in the first year or
$3 million in the second and third years.
Jonathan would buy the company's equipment and $100,000 from that
sale would be distributed to the 97 unsecured creditors owed $320,000.
KEYWORDS: BANKRUPTCY by CNB