Kunzel Completes Another Save : Itel Chairman to Step Down After Reorganization
Come Thursday, if all goes according to plan, Herbert Kunzel will step down as chairman of Itel Corp. at the close of the reorganized transportation-equipment leasing concern’s annual meeting.
It will be the crusty 76-year-old’s third retirement in the past 11 years. It probably won’t be his last.
Kunzel’s specialty is running bankrupt companies. Before steering Itel through a successful reorganization under Chapter 11 of the U.S. Bankruptcy Code, he presided over the wreckage of San Diego-based Westgate California Corp., the conglomerate built by C. Arnholt Smith.
Kunzel got into the bankruptcy business after his mandatory retirement as president of the then-healthy International Harvester Corp.’s solar turbines division when he turned 65.
“I believe that a person stays well by remaining active, both mentally and physically,” says Kunzel, who clearly practices what he preaches. A friend in Big Timber, Mont., says the septuagenarian has been known to go duck hunting in 15-degrees-below-zero weather during driving Rocky Mountain snowstorms.
Although his wife, Minerva, is “taking me off to the south of France for 10 weeks” after he leaves Itel, he’s already been approached for--and is considering--consulting jobs with several troubled West Coast companies.
Working, he says, enhances the value of his leisure-time activities. “The reason I enjoy hunting, fishing and golf is because I never tire of them--I never get to spend as much time on them as I’d like.”
Certainly, his assignment at Itel, which he took over at the age of 73, was a full-time job. While there, he pushed through a complicated reorganization plan that settled over $1.4 billion in outstanding claims. Secured creditors got back 72 cents on the dollar.
At Westgate, he sold off the remains of an economic empire that once included a tuna cannery, the San Diego Padres baseball team, Air California and numerous Yellow Cab franchises.
“He is a tough old bird,” says Los Angeles bankruptcy attorney Herman Glatt, who worked with Kunzel on the reorganizations of both Itel and Smith’s Westgate California.
Smith, himself in his 80s, was recently sent to prison for his role in Westgate’s collapse. “I feel that he destroyed the lives of many families that were dependent on his leadership,” says Kunzel, who believes that Smith’s punishment was in order.
At Itel, however, Kunzel didn’t follow a court-appointed examiner’s recommendation that he sue Itel’s former management. “They were already defendants in numerous class-action lawsuits,” Kunzel notes. Had Itel filed suit, he says, the reorganization would have been jeopardized.
“In the end, the creditors were best served by our decision,” Kunzel says. “In a reorganization, that’s who you’re working for--the creditors.”
Kunzel “doesn’t give anything away,” attorney Glatt adds. “He is an adroit negotiator and strategist.”
While serving as Westgate’s court-appointed bankruptcy trustee, Kunzel masterminded a plan to auction off Air California. The regional carrier fetched $61.5 million from a group of investors--compared to Air Florida’s original bid of $45 million for all of Westgate.
As a result, Westgate shareholders who stayed around for the decade-long bankruptcy proceedings actually made a profit on the deal.
Came to Itel in 1981
“Herb just relishes a challenge,” says F. Warren Hellman, a San Francisco investment banker and member of Itel’s board. “He loves to get in there and mix it up. He loves a good fight, and that’s exactly what a reorganization is. You’re constantly doing battle with one creditor or another.”
Kunzel was recruited to Itel as a director in March, 1981, two months after its Chapter 11 filing. The once fast-growing company, reeling from the collapse of its computer-leasing business and rocked by charges of fraud and mismanagement, “was looking for Simon-pure types,” attorney Glatt recalls.
Kunzel was one of a group of respected businessmen who joined Itel’s board at the time. “It was like taking a helicopter to the Titanic when it was already sinking,” recalls fellow director Hellman.
“But from the very beginning, Herb emerged as the leader of the new directors,” Hellman says. “Because of his experience at Westgate, Herb was the most knowledgeable about what we were going through.”
By 1982, Kunzel was the obvious choice to succeed James Maloon when he stepped down as Itel’s chairman, president and chief executive. Under Maloon, the company had been drifting, directors say.
“Herb brought stability and lots of savvy to a very delicate situation at a most appropriate time,” says James D. Woods, president and chief executive of Baker Oil Tools and a director of Itel.
After negotiating a contract that provided, among other things, travel expenses for himself and his wife between San Francisco and their homes in San Diego and Sun Valley, Idaho, Kunzel set out to get a reorganization plan for Itel confirmed by the court and to build a new management for the troubled company.
Successor Ousted
Itel emerged from bankruptcy in September, 1983, but Kunzel acknowledges that he was less successful at building a new management team. His hand-picked successor, William P. Twomey, was ousted as president and chief executive of Itel in March. Board members say Twomey failed to adequately control costs; Twomey didn’t return calls seeking comment.
Robert G. Coo, Itel’s vice president of finance, is also leaving, and other departures are expected.
In part, the turnover reflects the influence of Samuel Zell, a Chicago real estate developer who controls about 22% of Itel’s post-reorganization common stock.
Zell, 43, will succeed Kunzel as chairman. He bought his stake in Itel to take advantage of the company’s net operating loss carry-forwards of $320 million and unused investment tax credits of $42 million.
Zell has promised an aggressive program of acquisitions of profitable companies whose earnings can be sheltered by Itel’s tax credits. The acquisitions will supplant Itel’s existing businesses, which lease intermodal cargo containers and railroad cars.
Kunzel’s associates say he has mixed feelings about Zell’s ascension. “Zell bought his stake uninvited, and that’s just not Herb’s way of doing things,” a fellow director says.
But if Kunzel, an attorney by training who earned $317,000 at Itel last year, has any regrets, he’s keeping them to himself. Noting that Itel’s common stock, which trades in the over-the-counter market, has roughly doubled since the company emerged from bankruptcy proceedings, Kunzel says he’s proud of the fact that “we made Itel attractive to outsiders.”
Gazing out his office window at a spectacular view of San Francisco Bay, Kunzel adds softly: “I’d have felt badly if nobody wanted it.”
