Holiday Corp. Plans Restructuring : Would Limit Power of Big Shareholders, Reorganize Debt

Holiday Corp.’s board proposed a $2.8-billion plan Wednesday to restructure the company’s debt and limit the power that a single stockholder can wield in corporate affairs.

Under the plan, shareholders would receive a $65-a-share dividend, but the company said in a statement that the value of each share of stock would likely decline after the recapitalization goes into effect.

The company operates the original Holiday Inn chain and has four other hotel chains serving separate hotel markets.

James Fingeroth, a company spokesman, said payment of the dividend would make up for the decline in stock value and would cost the company about $1.6 billion. Other expenses, including the refinancing, would amount to about $1.2 billion, he added.

Stockholders are expected to vote on the plan early next year.

On the New York Stock Exchange, shares of Holiday Corp. closed Wednesday in composite trading at $76.50, up 62.5 cents per share.

New York real estate developer Donald Trump recently filed documents in Nevada indicating that he has purchased 4.8% of Holiday Corp.’s stock.

Michael Esposito, an analyst with the New York securities firm Oppenheimer & Co., said the company may be trying to prevent a takeover.

Dispute With Trump

“It’s reasonable to assume that maybe this action occurred because they were worried about that,” he said.

“We’re not commenting on Donald Trump,” said Robert Brannon, Holiday Corp.’s public relations chief in Memphis.

Trump was a partner with Holiday Corp. earlier this year in a casino hotel project along the Boardwalk in Atlantic City, N.J.

But after a dispute over design and management, Trump paid $73 million in cash and notes and assumed a $150-million mortgage in May to buy out Holiday Corp.’s share of the property, known as Trump Plaza.

Under the refinancing plan, a stockholder with up to 10% of Holiday Corp. stock would get one vote per share in deciding company business. But for a shareholder with additional stock, each share above 10% would return one-hundredth of a vote. No stockholder would be allowed to hold more than 15% of the total voting power of the shareholders, according to the plan. Voting limits would expire in five years or when any stockholder obtained 75% of the outstanding shares, under terms of the plan.

Financing for the venture would come from bank loans and the sale of securities, the company said.

The plan would also provide new stock issues to corporate executives as an incentive for good work.

“It will result in management owning about 10% of the company shares. The company now has about 24 million shares outstanding,” Fingeroth said in an interview from his New York office.