Western Union Plans Overhaul to Reduce Debt

Western Union Corp., which last turned a profit in 1982 and last year reduced its work force by more than a fifth, announced a major reorganization Wednesday aimed at slashing debt costs and improving liquidity.

The comprehensive restructuring will require completing negotiations for repayment of $321 million in bank debt and swapping existing debt issues for new notes and common stock.

A crucial step calls for raising up to $200 million in new capital to enable Western Union to make a $120-million payment to its bank creditors by June--a precondition for their agreement to reschedule the remaining debt for repayment over five years.

The plan also calls for merging Western Union, a holding company, into its main subsidiary, Western Union Telegraph Co. Shareholders will vote on that proposal at the May 15 annual meeting.

(The holding company was formed in the early 1970s to enable Western Union, whose communications business was entirely government regulated, to diversify into unregulated fields, a spokesman said, and developments since then have made that structure unnecessary.)

Four-Month Timetable

“With the proper financial structure in place, we believe Western Union can re-establish its position in the telecommunications industry,” Chairman Robert S. Levanthal said in a statement released with the company’s filing of its contemplated restructuring with the Securities and Exchange Commission.

The recasting will be accomplished over four months, Levanthal added, assuming approval by shareholders and creditors.

Western Union’s common stock dropped $1.125 a share to a new 12-month low of $7.875 as 775,000 shares changed hands on the New York Stock Exchange. The stock had traded for $14.375 last Aug. 30.

Western Union’s outside auditors have qualified both the company’s 1984 and 1985 financial statements, citing uncertainty over whether financing can be obtained to meet its debt obligations.

The company lost a record $367.2 million last year. About $300 million of that was a special charge taken in the fourth quarter, primarily to reflect a write-down in the value of aging communications equipment.

The company ran into a shortage of capital in November, 1984, when its bankers canceled a $100-million line of credit, spokesman Warren R. Bechtel said.

Dividends on both common and preferred stocks were suspended at that time, Bechtel said. The restructuring plan contemplates payment of $37.5 million in omitted preferred dividends.

“They’ll be made whole,” Bechtel said of the preferred shareholders. Six of Western Union’s seven preferred stock issues rose slightly in trading Wednesday.

Negotiations with 31 other banks resulted in an interim credit arrangement by the end of 1984, an arrangement that has been renewed repeatedly pending agreement on the long-term debt restructuring plan announced Wednesday.

“During 1985, the telegraph company reduced its work force by 2,400 employees, or 22%, and negotiated new union contracts that will result in continued reductions in operating costs this year,” Levanthal said.

The staff reduction resulted from not filling openings across the board, plus some early retirements and layoffs.

Levanthal said the company also has slashed overhead, cut back on capital expenditures and “sold or contracted to sell assets for more than $200 million in cash.”

It recently announced the sale of its Government Services division to American Satellite Co. for $155 million in cash. That deal is scheduled to close next month, Bechtel said.