Threat of Loan Foreclosure Is Closing In on Helionetics
Helionetics Inc., the struggling Irvine defense contractor, said Friday that it may be forced to seek bankruptcy court protection because one of its principal lenders is threatening to foreclose on a $4.5-million loan next week.
“We haven’t filed for bankruptcy yet,” said Helionetics President Michael Mann, “but we will if we can’t reach an accommodation” with Downey Savings and Loan Assn. of Costa Mesa.
In an unrelated matter, Mann confirmed that company founder Bernard Katz and Board Chairman Wilson Talley resigned from Helionetics’ board earlier this month. The resignations bring to six the number of resignations from the 10-man board in the last month. Only two of the vacancies have been filled.
Katz, a controversial Beverly Hills businessman who has resigned and rejoined the board twice before, gave no reason for his latest move and could not be reached for comment. Talley, a University of California professor, had announced earlier this year that he would resign.
The foreclosure threat and resignations are the latest blows to hit the small defense electronics maker in recent months. Earlier, the company reported a massive $22.4-million loss for 1985 and revealed that it was behind in payments to several creditors.
The latest jolt came earlier this week when Downey told the company that it would begin a foreclosure action July 31 on its loan. In addition to the $4.5-million principal that was originally due March 31, Helionetics owes Downey more than $30,000 in interest.
Mann argued that Downey’s threat could “compromise Helionetics’ ability to meet its commitments to support . . . national defense programs,” and called on Downey to support a debt-restructuring agreement with the rest of the company’s creditors.
However, a Downey spokesman said the association is exercising its right to collect the loan because of its obligations to its shareholders and depositors.
The loan in question was made to Helionetics in 1984 to enable the company to buy stock for its employees. The plan called for the company to borrow money to buy the stock, which was then trading at about $10.63 per share, and to repay the loan by selling a fraction of the shares, which theoretically would have increased in value.
However, when the loan came due, Helionetics shares were trading at about $2 to $3 per share. The stock closed at $1.63 in trading Thursday on the American Stock Exchange. No shares were traded Friday.
