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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 19, 1997
PAYLESS CASHWAYS, INC.
(Exact name of registrant as specified in its charter)
Iowa 1-8210 42-0945849
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
Two Pershing Square, 2300 Main Street,
P.O. Box 419466, Kansas City, Missouri 64141-0466
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (816) 234-6000
N/A
(Former name or former address, if changed since last report.)
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ITEM 3: Bankruptcy or Receivership.
The United States Bankruptcy court for the Western District of Missouri
(the "Court") confirmed the Payless Cashways, Inc. (the "Company") First Amended
Plan of Reorganization, as modified on October 9, 1997 (the "Plan"), on November
19, 1997. The effective date of the Plan is expected to be on or around December
2, 1997. The following summary of the Plan omits certain information set forth
in the Plan. Any statements contained herein concerning the Plan are not
necessarily complete, and in each such instance reference is made to the Plan, a
copy of which is incorporated herein by reference to the Company's Quarterly
Report on Form 10-Q for the quarter ended August 30, 1997. Each such statement
is qualified in its entirety by such reference.
At the current time there are 39,964,041 shares of Company stock issued
and outstanding. Upon implementation of the Plan, the Company will issue
20,000,000 shares of newly reorganized Payless common stock (the "New Common
Stock"). The Plan generally provides for the following: (I) The secured bank
group (the "Existing Lenders") under the existing credit agreement (the "Amended
Credit Agreement") will receive (a) payment of accrued interest, fees and
expenses, (b) Net Cash Proceeds (as defined in the Plan) from the sale of
certain collateral securing the Amended Credit Agreement and the collection of
certain promissory notes pledged to the Existing Lenders, (c) their allocable
portion of $278.1 million of new term notes (the "New Term Notes") under a
secured term loan facility to take effect upon emergence from Chapter 11 (the
"Term Facility") and (d) an estimated 10,730,671 shares of New Common Stock
(equivalent to approximately 53.7% of the shares of the newly reorganized
Company expected to be outstanding upon emergence from Chapter 11 (the
"Effective Date")), of which 460,000 shares will be distributed to the lenders
providing a revolving credit facility to supply working capital financing to
take effect upon emergence from Chapter 11 (the "Exit Facility") in
consideration for their commitment to provide the Exit Facility. The New Term
Notes will be subject to a scheduled amortization of an aggregate of $3 million
per year and shall be prepaid in the amount of any dispositions or realizations
on certain collateral. In addition, the Term Facility will be prepaid from an
annual cash flow sweep of 65% of excess cash flow (as defined in the Term
Facility). The New Term Notes will also contain covenants and other provisions
consistent with the Exit Facility. (II) The holders of notes under the existing
loan facility with the Prudential Insurance Company of America (the "Prudential
Loan Facility") will receive new notes (the "New Notes") pursuant to a new loan
facility in the amount of the existing notes plus accrued interest. These New
Notes will bear interest at a rate of LIBOR plus 4.0% per annum, mature seven
years from the Effective Date, will amortize at a rate of $4 million per year,
subject to adjustment for asset sales proceeds applied as a credit toward the
scheduled amortization, and will be secured by the same collateral that secures
the existing Prudential Loan Facility. (Subsequent to July 21, 1997, Prudential
sold its interest in these notes to UBS Mortgage Finance, Inc.) (III) The
Company will enter into a loan agreement with the financial institutions which
were party to a synthetic lease facility, providing for payment by the Company
of $16 million, at an interest rate of LIBOR plus 3.5%, with a maturity of 54
months, with principal installments aggregating $1 million the first year, and
thereafter quarterly installments of approximately $1 million secured by a first
mortgage on the three remaining synthetic lease store sites. In addition, the
loan agreement contains various financial incentives for prepayment of the loan
prior to matutiy. The balance of these financial institutions' claims,
approximately $15.4 million, will be treated as a general unsecured claim. (IV)
Unsecured claims against the Company of vendors and suppliers for goods
delivered and services rendered prior to the Petition Date, claims in respect of
the Senior Subordinated Notes, contingent unliquidated claims and claims for
damage arising from the rejection by the Company pursuant to Section 365 of the
Bankruptcy Code of executory contracts and unexpired leases (collectively,
"General Unsecured Claims") will receive their pro rata share of 8,269,329
shares or approximately 41.3% of the shares of the newly reorganized Company
expected to be outstanding. (V) Holders of issued and outstanding shares of
existing preferred stock will receive their pro rata share of 600,000 shares of
New Common Stock (3% of the shares of the newly
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reorganized Company expected to be outstanding). (VI) Holders of issued and
outstanding shares of existing common stock will receive their pro rata share of
400,000 shares of New Common Stock (2% of the shares of the newly reorganized
Company expected to be outstanding). In addition, any stock options relating to
existing preferred stock and common stock will be canceled on the Effective
Date.
Fractional shares of New Common Stock will not be issued to creditors
or shareholders in connection with the Plan. In addition, no distribution of
less than $5.00 will be made for fractional share interests. As a result of
these provisions, equity security holders holding less than 100 shares of
existing common stock will receive no distribution of New Common Stock and may
not receive any cash under the Plan.
For financial information regarding the assets and liabilities of the
Company refer to the Company's Quarterly Report on Form 10-Q for the quarter
ended August 30, 1997. The Company's most recent Monthly Operating Report, filed
with the Court on November 17, 1997, reflects that the total assets of the
Company were $1,243,804 and total liabilities were $1,046,595 as of November 1,
1997, before the application of "fresh start" reporting. "Statement of Position
90-7" of the American Institute of Certified Public Accountants adopted by the
Company provides that the emergence from the Chapter 11 proceeding will result
in the creation of a new reporting entity without any accumulated deficit and
with the Company's assets and liabilities restated to their fair values, under
so-called "fresh start" reporting. The impact of fresh start reporting will be
dependent on the terms of the Plan and the fair values of assets and remaining
liabilities at such time. The Company believes that the present aggregate
carrying value of goodwill and land, buildings and equipment exceed the fair
value of such assets and, as a result, write-downs in the carrying value of such
assets will likely be required as a part of fresh start reporting, although the
amounts of such write-downs are not presently determinable.
ITEM 7: Financial Statements and Exhibits
(a) Financial Statements of Business acquired.
Not applicable.
(b) Pro Forma Financial Information.
Not applicable.
(c) Exhibits.
2.1 First Amended Plan of Reorganization, as modified on
October 9, 1997 (incorporated herein by reference to
Exhibit 2.1 filed as part of the Company's Quarterly
Report on Form 10-Q for the quarter ended August 30,
1997).
99.1 Press Release dated November 19, 1997.
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Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PAYLESS CASHWAYS, INC.
Dated: November 26, 1997 By: /s/ Stephen A. Lightstone
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Stephen A. Lightstone, Senior Vice President
Finance and Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)
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Case Name: In re Payless Cashways, Inc.
Case No.: 97-50543
Contact: Ann Julsen/Anita-Marie Hill - Sitrick And Company
310/788-2850 or 816/234-6183
Court Confirms Payless Cashways' Reorganization Plan;
Company to Emerge from Chapter 11 December 3, 1997
Kansas City, Mo. -- November 19, 1997 -- Payless Cashways,
Inc. (OTC Bulletin Board: PYLSQ), the nation's fifth largest retailer of
building materials and home improvement products, announced today that the U.S.
Bankruptcy Court for the Western District of Missouri has confirmed the
Company's First Amended Plan of Reorganization. The Court's confirmation of
Payless Cashways' Plan clears the way for the Company's emergence from a
voluntary Chapter 11 proceeding on December 3, 1997.
Confirmation of the Plan came at the conclusion of a hearing to assure
that all reorganization requirements had been met under the Bankruptcy Code,
which included acceptance by the requisite majority of creditor and shareholder
classes.
Payless also announced a new nine-member Board of Directors, which will
assume responsibilities December 3rd after the reorganized Payless Cashways
emerges from Chapter 11. The new directors include:
o Peter G. Danis - Interim Chairman of Payless Cashways, Inc. and
President/Chief Executive Officer of Boise Cascade Office Products Corp.
o David M. Chamberlain - Chairman of Genesco, Inc.
o H. D. (Harry) Cleberg - President/Chief Executive Officer of Farmland
Industries, Inc.
o David G. Gundling - President/Chief Executive Officer of Hagemeyer Foods
N.A., Inc.
o Max D. Hopper - Principal of Max D. Hopper Associates, Inc.
o Donald E. Roller- Former President/Chief Executive Officer of U.S. Gypsum
Company
o David Stanley - Chief Executive Officer of Payless Cashways, Inc.
o Susan M. Stanton - President/Chief Operating Officer of Payless Cashways, Inc.
o Peter M. Wood - Former Managing Director of J.P. Morgan & Company, Inc.
Under the terms of the plan, holders of secured bank claims under the
Company's pre-petition credit facilities, estimated at $419.4 million, are
expected to receive approximately $43 million in cash, $278.1 million of new
term notes, and 10.7 million shares of new common stock in the reorganized
Payless Cashways.
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Holders of general, allowed unsecured claims, including trade claims
and Senior Subordinated Notes, estimated to total approximately $311.6 million,
will receive approximately 8.3 million shares of common stock in the reorganized
Company.
The Plan also calls for current common stockholders to receive 400,000
shares of new common stock -approximately one share of new Payless common stock
for each 100 shares of existing common stock. The new stock is expected to trade
on the NASDAQ National Market under the symbol "PCSH" beginning December 3rd. It
is anticipated that the initial, partial distribution of new common stock will
commence in December 1997, to holders of allowed claims and interests, including
trade creditors, bondholders, and shareholders.
"Since filing Chapter 11 just four months ago, Payless Cashways has
successfully restructured the Company's financial position, resulting in a
stronger, leaner Company emerging with a balance sheet that supports our
business, and a business that supports our balance sheet," Mr. Stanley said. "As
of the effective date of the Plan, total liabilities are reduced from $1.1
billion to approximately $597 million; balance sheet debt is reduced from $689
million to approximately $426 million. Under the Plan, interest costs are
reduced from more than $60 million in 1996 to a projected $29 million by 2002."
As part of the restructuring, the Company closed 29 underperforming
stores and reduced its workforce by 1,900 -- reducing operating expenses by
approximately $80.3 million annually. Previously implemented corporate expense
reductions will reduce operating costs by $7 million annually.
"Going forward with less debt and more financial flexibility, the new
Payless Cashways will invest in the renovation and upgrading of its consumer
stores in order to provide a broader range of product choices and a better
shopping experience," Mr. Stanley said. "At the same time, our dedicated
national sales force is concentrating on providing high levels of service to
large-volume professionals Company-wide and in Contractor Supply centers in
select markets."
"Looking ahead to the year 2000 and beyond, our industry will have more
participants than just two warehouse competitors. Nearly one million
professional and do-it-yourself
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customers shop our 164 stores in 20 states weekly. In our niche, targeting
professionals and DIYers who prefer a non-warehouse store format, we believe we
can and will be among the best building materials retailers," he said.
Mr. Stanley emphasized that "the reorganization could not have occurred
without the hard work and dedication of every Payless Cashways employee
nationwide. Our employees, on whom tremendous demands have been placed to make
the new, reorganized Payless Cashways a reality, are owed a sincere and
heartfelt thanks for a job well done. Our suppliers have also stood with us
through this extremely difficult time, and for their loyalty, we are grateful."
The Company filed its Chapter 11 petition and Plan of Reorganization in
the U.S. Bankruptcy Court for the Western District of Missouri in Kansas City on
July 21, 1997.
Payless Cashways, Inc. is a full-line building materials specialty
retailer concentrating on remodelers, residential and commercial contractors,
property management and industrial firms, and do-it-yourselfers. At November 19,
1997, the Company operates 164 building materials stores in 20 states located in
the Midwestern, Southwestern, Pacific Coast, and Rocky Mountain areas. The
stores operate under the names of Payless Cashways, Furrow, Lumberjack, Hugh M.
Woods, Knox Lumber, and Contractor Supply. Payless Cashways currently employs
approximately 12,500 people in its stores, headquarters offices, and
distribution centers.
This paragraph is included in this release to comply with the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. There
are certain important factors that could cause results to differ materially from
those anticipated by the forward-looking statements made above. Investors are
cautioned that all forward-looking statements involve risk and uncertainty.
Among the factors that could cause different results are: consumer spending and
debt levels, interest rates, housing activity, lumber prices, product mix,
growth of certain market segments, competitor activities, an excess of retail
space devoted to the sale of building materials, success of the Company's
strategy, the adequacy of and compliance with financing, stability of customer
demand and supplier support, and timely emergence from Chapter 11. Additional
information concerning these and other factors is contained in the Company's SEC
filings, copies of which are available from the Company without charge or on the
Company's web site, payless.cashways.com.
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