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AEROSPACE CREDITORS LIQUIDATING TRUST
SEMI-ANNUAL REPORT TO CBI HOLDERS
FORM N-30D FILED PURSUANT TO SECTION 30(d)
OF THE INVESTMENT COMPANY ACT OF 1940
August 14, 1997
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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
<TABLE>
<S> <C>
For quarterly period ended June 30, 1997 Commission File Number 0-21984
</TABLE>
AEROSPACE CREDITORS LIQUIDATING TRUST
(Exact name of registrant)
<TABLE>
<S> <C>
New York 13-7020026
(State of organization) (I.R.S. Employer
Identification Number)
</TABLE>
444 Madison Avenue, 7th Floor, New York, New York 10022
(Address of principal executive offices and zip code)
(212) 317-8292
(Registrant's telephone Number)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes X No
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Number of Units of Beneficial Interest outstanding as of August 11, 1997 was
3,298,782.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AEROSPACE CREDITORS LIQUIDATING TRUST
STATEMENT of NET ASSETS in LIQUIDATION
as of June 30, 1997 and 1996
(In thousands)
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<TABLE>
<CAPTION>
1997 1996
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Assets:
Cash and temporary cash investments $4,054 $ 1,104
Restricted cash (Note 8) 83
Interest receivable 8 5
Assets, at estimated fair value (Notes 4 and 5) 10,300
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Total assets 4,062 11,492
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Liabilities:
Estimated costs of liquidation (Notes 1 and 3) 438 896
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Total liabilities 438 896
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Net assets in liquidation $3,624 $10,596
====== =======
</TABLE>
The accompanying notes are an integral
part of these financial statements.
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AEROSPACE CREDITORS LIQUIDATING TRUST
STATEMENT of CHANGES in NET ASSETS in LIQUIDATION
(In thousands)
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<TABLE>
<CAPTION>
Three months Six months
ended ended
June 30, 1997 June 30, 1997
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Changes in net assets in liquidation before distributions:
Increase in interest and dividend income $ 10 $ 10
Increase in accrued interest income 6 8
Gain on receipt of proceeds from Thomson Litigation 3,844 3,844
Increase in estimated fair value of assets in liquidation 266
Decrease in estimated costs of liquidation, net (84) (92)
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Net increase in net assets in
liquidation before distributions 3,776 4,036
Distributions 11,216 11,216
Net assets in liquidation, beginning
of period 11,064 10,804
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Net assets in liquidation, end of period $ 3,624 $ 3,624
======== ========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
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AEROSPACE CREDITORS LIQUIDATING TRUST
STATEMENT of RECEIPTS and DISBURSEMENTS
(In thousands)
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<TABLE>
<CAPTION>
Three months Six months
ended ended
June 30, 1997 June 30, 1997
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<S> <C> <C>
Receipts:
Interest income $ 10 $ 10
Proceeds from Thomson litigation 14,669 14,669
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Total Receipts 14,679 14,679
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Disbursements:
Payments of estimated costs of
liquidation:
Trustee fees 67 135
Professional fees 60 80
Other 5 74
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Total Disbursements 132 289
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Increase in cash and temporary
cash investments before distributions 14,547 14,390
Distributions 11,216 11,216
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Increase in cash 3,331 3,174
Cash, beginning of period 723 880
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Cash, end of period $ 4,054 $ 4,054
========= =========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
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AEROSPACE CREDITORS LIQUIDATING TRUST
NOTES TO FINANCIAL STATEMENTS
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1. Basis of Presentation:
The Aerospace Creditors Liquidating Trust (the "Trust") was established
on June 28, 1993 in accordance with the LTV Second Modified Joint Plan
of Reorganization (the "Plan") confirmed by the United States
Bankruptcy Court for the Southern District of New York (the "Bankruptcy
Court") by order dated May 26, 1993. The purpose of the Trust is to
marshal, liquidate and distribute the Trust assets in an expeditious
and orderly manner.
The Trust issued certificates of beneficial interest ("CBIs") to
holders of allowed claims against the LTV Aerospace and Defense Company
("Aerospace") in exchange for receiving certain assets deemed
distributed to the creditors and contributed to the Trust. The
Aerospace Creditors Liquidating Trust Agreement (the "Trust Agreement")
provides that the Trust will terminate ten years from the date of the
transfer of the Initial Trust Assets to the Trust, unless earlier
termination is required by action of New York State law or CBI holders
or by distribution of all Trust assets, unless extended for one-year
renewal terms pursuant to the terms of the Trust Agreement.
In accordance with the Trust Agreement, each Trustee shall be
indemnified by and receive reimbursement from the Trust against and
from any and all loss, liability or damage, including payment of
attorney's fees and other costs of defending himself, which such
Trustee may inure or sustain, without gross negligence or willful
misconduct, in the exercise and performance of any of the powers and
duties of such Trustee under the Trust Agreement.
Preparation of the financial statements on the liquidating basis
required that the Trustees make a number of assumptions regarding the
value of the Trust's assets and the projected total cost of liquidating
such assets and winding up the affairs of the Trust. There may be
differences between the assumptions and the actual results because
events and circumstances frequently do not occur as expected. Those
differences, if any, could result in a change in the net assets
reflected in the statements of net assets in liquidation as of June 30,
1997 and 1996.
2. Significant Accounting Principles:
Under the terms of the Plan, certain cash and temporary cash
investments are restricted for various reserves, as described in Note
9. In addition, temporary cash investment alternatives are limited to
certain securities that comply with guidelines and regulations of the
Internal Revenue Service ("IRS") concerning investments by liquidating
trusts.
Dividend and interest income is recorded as earned.
The present value discount recorded in the estimated costs of
liquidation is amortized using the interest method.
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AEROSPACE CREDITORS LIQUIDATING TRUST
NOTES TO FINANCIAL STATEMENTS, Continued
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3. Estimated Costs of Liquidation:
The estimated costs of liquidation represent the projected costs of
operating the Trust through its expected economic life, which the
Trustees estimate will extend to December 31, 1997, discounted using a
5.5% present value factor. These costs, which include staff, office
space, professional fees, trustee fees and transfer agent fees are
based on various assumptions regarding the administrative obligations,
use of professionals and other matters. Actual costs are likely to
differ from estimated costs.
4. Valuation of Assets:
Assets of the Trust are recorded at their estimated fair value.
Generally, fair value is the amount which the Trust reasonably expects
to receive upon a sale to a willing buyer. Estimated fair value is a
good faith estimate determined by the Trustees based on the underlying
characteristics of such assets, including but not limited to the size
of investment, credit worthiness of the issuer, yield to maturity,
status of litigation, and private bids. In addition, discount factors,
including those related to the time value of money and risk associated
with collection, have been applied to these assets to arrive at
estimated fair value. Fair value, determined as described above, may
differ from the eventual realizable value of the assets, which can
fluctuate over time in light of business, legal and economic conditions
and the financial results of the obligor. These differences may be
significant.
5. Trust Assets:
The Trust assets were distributed to the Aerospace Creditors on June
28, 1993, (the "Effective Date") and immediately thereafter were
transferred to the Trust which then issued CBIs to the Aerospace
Creditors.
INITIAL THOMSON LITIGATION PROCEEDS. The Initial Thomson Litigation
Proceeds are the first $10 million in proceeds, plus a pro rata portion
of any interest actually received by LTV under any judgment or
settlement (to be paid without any deduction for legal fees or costs
incurred by LTV) actually received pursuant to the contractual claims
of Aerospace in the action entitled LTV Aerospace and Defense Co. v.
Thomson-CSF S.A., Adv. Proc. No. 920-9531A (Bankr. S.D.N.Y.) (the
"Thomson Litigation").
On the Effective Date of the Plan, LTV granted the Trust a first
priority security interest in Aerospace's contractual claims against
Thomson-CSF S.A. ("Thomson") arising out of an April 1992 agreement
which provided for the transfer to Thomson of substantially all of
Aerospace's missiles division assets. The agreement provided for
Thomson to pay a non-refundable fee of $20 million in the event that
certain United States governmental approvals were not obtained and
Thomson did not proceed with the closing. On July 28, 1992, Thomson
advised LTV that it would not proceed with the closing. LTV demanded
and Thomson refused payment of the $20 million reverse break-up fee.
On August 3, 1992, LTV filed a complaint on behalf of Aerospace in the
Bankruptcy Court seeking
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AEROSPACE CREDITORS LIQUIDATING TRUST
NOTES TO FINANCIAL STATEMENTS, Continued
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payment of the $20 million reverse break-up fee plus interest,
attorneys' fees and costs and compensatory damages.
On August 23, 1995, the Bankruptcy Court ruled in favor of LTV and
ordered Thomson to pay LTV, Vought Industries, Inc. and Vought
International, Inc. the sum of $20 million, with interest thereon at
the rate of nine percent (9%) from August 1, 1992 to August 23, 1995.
Thomson appealed the ruling to the United States District Court for the
Southern District of New York (the "District Court").
The District Court heard oral argument on this matter on July 2, 1996
and on July 30, 1996, the District Court affirmed the Bankruptcy
Court's ruling in favor of LTV. Thomson appealed the decision of the
District Court to the United States Court of Appeals for the Second
Circuit (the "Second Circuit"), and on March 24, 1997, the Second
Circuit affirmed the District Court's decision.
On April 28, 1997, the Trust received a cash payment of $14,669,479.94
of the proceeds paid by Thomson (the "Thomson Payment"), which consists
of $10,000,000, plus the Trust's pro rata portion of interest on the
judgment in the amount of $4,669,479.94. The Thomson Payment resulted
in a gain of $3,844,000 from the estimated fair value of $10,826,000.
6. Taxes:
The Trust was formed as a grantor trust, and thus, in its filings with
the IRS, the Trust itself is not a taxable entity. Accordingly, each
initial holder of a CBI is required to report on his federal tax return
his allocable share of any income, gain, loss, deduction or credit
recognized or incurred by the Trust. The Trust's tax basis in assets
transferred from holders of claims against Aerospace in connection with
the Plan generally equals the fair market value of such assets as of
June 28, 1993.
7. Certificates of Beneficial Interest:
The Trust issued 3,302,250 units of beneficial interest (the "Units")
on September 30, 1993 to holders of allowed claims in Classes 4.30,
5.30 and 7.30, the date registration of the Trust's CBIs became
effective on Form 10. As of June 30, 1997, 3,298,782 Units had been
distributed to holders of allowed claims. The remaining 3,468 Units
were held in an escrow account, as described in Note 8, for the benefit
of, and pending distribution to, the proper holders of allowed claims.
Pursuant to the terms of the Plan and the Trust Agreement, such
undistributed Units are no longer required to be held in escrow and
were canceled on January 16, 1997.
The CBIs were approved by the Pacific Stock Exchange on August 3, 1993,
with trading activity authorized as of September 22, 1993. The last
trade on the Pacific Stock Exchange for the second quarter of 1997
occurred on June 2, 1997 and was for $4 3/16.
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AEROSPACE CREDITORS LIQUIDATING TRUST
NOTES TO FINANCIAL STATEMENTS, Continued
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8. Distributions from the Trust:
The Trust Agreement provides for distributions to be made as often as,
and in the discretion and judgment of the Trustees, there are monies in
an amount sufficient to render feasible a distribution of cash or other
property to CBI holders, but no less often than annually (subject to
there being at least $3 million in cash or other non-cash property
designated by the Trustees available for distribution). Such
distributions are made to CBI holders based upon the number of Units
owned as of the record date determined by the Trustees.
Since inception, the Trust has made the following cash distributions,
in the aggregate amount of $83,766,291.30 ($25.37 per Unit):
(i) $4,590,127.50 ($1.39 per Unit) on March 15, 1994 to holders of
record as of March 7, 1994;
(ii) $2,245,530 ($0.68 per Unit) on June 3, 1994 to holders of
record as of May 23, 1994;
(iii) $2,972,025 ($0.90 per Unit) on February 24, 1995 to holders of
record as of February 10, 1995;
(iv) $42,268,800 ($12.80 per Unit) on June 14, 1995 to holders of
record as of May 31, 1995;
(v) $20,473,950 ($6.20 per Unit) on December 8, 1995 to holders of
record as of November 24, 1995; and
(vi) $11,215,858.80 ($3.40 per Unit) on June 13, 1997 to holders of
record as of May 30, 1997.
The Trust established an Escrow Account for the purpose of holding
undistributed Units and distributions allocated to such Units.
Pursuant to the terms of the Plan and the Trust Agreement, such funds
are no longer required to be segregated for the benefit of the
undistributed Units. Therefore, the Escrow Account was closed on
December 31, 1996 with the balance of $82,593 transferred to the
Trust's custodian account.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Trust was established for the purpose of liquidating certain
assets. The Trust Agreement prohibits the Trustees from engaging in any
business. No part of the assets of the Trust or the proceeds, revenue or
income therefrom can be used or disposed of by the Trustees in furtherance of
any business.
As of June 30, 1997, the assets of the Trust consisted of the Cash
Reserve in the amount of approximately $4,054,000. On April 28, 1997, the
Trust received a cash payment of $14,669,479.94 in connection with the Thomson
Litigation, which consisted of $10,000,000, plus the Trust's pro rata portion
of interest on the judgment in the amount of $4,669,479.94. The Thomson
Payment resulted in a gain of $3,844,000 from the estimated fair value of the
Thomson Litigation of $10,826,000. The Trust declared a special cash
distribution of the Thomson Payment totaling $11,215,858.80 ($3.40 per Unit),
which was made on June 13, 1997, to holders of record as of May 30, 1997.
The Trust's source of funds as of June 30, 1997 is the Cash Reserve and
interest income from temporary cash investments. Other than the receipt of the
Thomson Payment, the Trust had only interest income of $10,000 from the Trust's
temporary cash investments during the three and six month periods ended June
30, 1997 (and accrued interest of $6,000 for the three month period and $8,000
for the six month period ended June 30, 1997), as compared to interest income
of $3,000 received during the six month period ended June 30, 1996 (and accrued
interest of $5,000 during the three and six month periods ended June 30, 1996).
The increase in interest income and accrued interest is a result of earnings on
the Thomson Payment prior to the distribution to CBI holders in June of 1997,
as compared to lower cash investments during the same period in 1996. The
Trust will not receive any further income other than interest income from the
Trust's temporary cash investments. The Thomson Payment is the last asset of
the Trust to be liquidated.
The Trust incurred liquidation costs of $132,000 and $289,000 during
the three and six month periods ended June 30, 1997, as compared to $135,000
and $408,000 during the same period in 1996, consisting primarily of
professional fees (including fees related to reporting under the securities
laws and accounting fees), fees to the Trustees of the Trust, and fees for
office space. The decrease in liquidation costs for the six months ended June
30, 1997 as compared to the six months ended June 30, 1996 is primarily due to
the reduction of professional fees incurred by the Trust as a result of the
liquidation of the assets of the Trust and also due to professional fees that
had accrued but were not yet paid as of June 30, 1997. The Trustees anticipate
that the liquidation costs incurred during the next quarter will increase as a
result of professional fees associated with the winding up of the Trust,
together with the actual payment of accrued but not yet paid professional fees
that will be paid during the next quarterly period.
The Trust assets consist solely of the Cash Reserve of approximately
$4,054,000. In order to maintain the listing of the Units on the Pacific
Exchange, Inc., the Units must trade at no less than $1.00 per Unit. If the
trading price falls below $1.00, the Pacific Exchange, Inc. may commence
delisting proceedings. There can be no assurance that the Units will continue
to trade at $1.00 per Unit or more.
The Trustees anticipate that they will distribute the cash remaining in
the Cash Reserve, after any deductions for wind-up expenses, after the Trustees
determine final wind-up and liquidation costs of the Trust, distribute a final
report to CBI Holders, and after any necessary
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Bankruptcy Court approval of final wind-up matters. The Trustees expect to
file motions with the Bankruptcy Court during August and October 1997, with the
view to distributing a final report to CBI holders in October 1997 (subject to
approval by the Bankruptcy Court), and making the final distribution of cash to
CBI holders in early December 1997. If the Trust incurs all of the current
estimated costs of liquidation, the final distribution to CBI holders would
consist of approximately $3,618,078 ($1.10 per Unit). While the Trust may not
incur all of the estimated costs of liquidation, there can be no assurance that
the Trust will not incur a greater amount, thereby reducing the actual
distribution to CBI holders.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Trust during the
second quarter of 1997.
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SIGNATURES
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.
AEROSPACE CREDITORS LIQUIDATING TRUST
(Registrant)
BY: /s/ MARK M. FELDMAN
--------------------------------
Mark M. Feldman
Trustee
BY: /s/ BRADFORD T. WHITMORE
--------------------------------
Bradford T. Whitmore
Trustee
BY: /s/ PAUL S. WOLANSKY
--------------------------------
Paul S. Wolansky
Trustee
Dated: August 14, 1997
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