Control Data Says It Violated Credit Terms : Results From Downward Restatement of Earnings

Control Data has disclosed that its recent downward revision of earnings put its first-half financial results in violation of restrictions on revolving credit arrangements with its banks.

However, the banks agreed to temporarily relax the restrictions, the computer company said.

The banks said they would allow the company to pay a third-quarter dividend after Control Data promised to use proceeds from planned public offerings to repay the $209 million outstanding under the credit arrangements, the company said.

Plans Two Offerings

The company plans to raise $300 million in two public offerings.

Control Data also disclosed that its finance subsidiary expects to sell one-third of its loan portfolio over the next five to eight months.

The disclosures were contained in a preliminary prospectus filed Friday with the Securities and Exchange Commission as part of registration materials for the public offerings.

The company intends to sell $200 million in subordinated notes due in 1995 and $100 million of depositary convertible preferred shares. Proceeds from the offerings will be used to repay debt, the company said.

In the prospectus, the company described Commercial Credit Co.’s plan to sell $2 billion of its $5.7 billion in finance receivables as part of a general restructuring of the finance subsidiary.

Control Data last week revised its 1984 and 1985 financial results to cut $26.5 million from 1984 earnings and deepen the loss for the first half of 1985 by $8.6 million.

1984 Net Lowered

As a result, 1984 net earnings were lowered from $31.6 million to $5.1 million and the loss for the first six months of 1985 was increased to $14 million from $5.4 million, the company said.

The 1984 change was suggested by the SEC, partly in connection with a review of Control Data documents.

The 1985 revision was made at the initiative of Control Data’s auditors as a result of losses in two companies in which it had invested, the company said.

One of the losses was reported too late to be included in Control Data’s second-quarter earnings report and the other was excluded erroneously from the second-quarter figures, the company said.