Wilderness Settles Lawsuit, Hopes to Escape Bankruptcy

Wilderness Experience reported last week that it was closer to emerging from bankruptcy-court proceedings after settling a lawsuit filed by Union Bank, its largest creditor.

Union had sued the Chatsworth company in May for repayment of a $1.7-million secured loan the bank made to Wilderness, a manufacturer of outdoors gear and clothing. The suit forced Wilderness, which was losing money, to seek protection from its creditors by filing for reorganization under Chapter 11 of the federal bankruptcy code on June 24.

With the settlement, Wilderness hopes to be “out of Chapter 11 by the end of November,” Wilderness President Bernard Kramer said in an interview. He also said the company has lined up outside capital of about $800,000 to resume operations, but Kramer declined to identify the new investors.

Poised for Revival

The new capital “will give us enough money to really get started and rebuild,” Kramer said, adding that Wilderness’ factory production, which had been halted last March, resumed on a limited basis two weeks ago. Wilderness has rehired about 10 employees. The company employed about 70 before stopping operation; it had employed 120 in 1985.

In mid-June, Kramer had said that he was about to secure a cash infusion from a private investment group. But Wilderness filed for bankruptcy reorganization instead.

Under the new settlement with Union, which was approved by the U.S. Bankruptcy Court, Wilderness will pay the bank $500,000 over 18 months and issue the bank 500,000 shares of its common stock, which have a current market value of $125,000.

In return, Los Angeles-based Union dropped its claims against Wilderness.

With the newly issued stock, Wilderness has about 6 million common shares and equivalents outstanding, giving Union an 8% stake in the company.

The stock, which was worth $1 a share in 1985, currently is trading at about 25 cents share, according to C.L. McKinney & Co., a Los Angeles brokerage firm that makes a market in the stock.

Thus, Union settled for much less than the amount of its loan. But Union’s proceeds could increase if the stock improves.

Wilderness previously indicated it might liquidate the company if no agreement was reached with the bank, in which case Union might have received much less than the $500,000 in cash.

Union spokeswoman Susan Murdy confirmed the settlement but otherwise declined comment.

Wilderness’ biggest stockholder is the Los Angeles investment group of MarBen, which owns about 1.75 million shares, or 29% of the stock.

Separately, Wilderness reported that it lost $1.5 million during the nine months ended July 31, compared with a year-earlier loss of $531,500. Nine-month sales plunged to $1.2 million from $2.9 million.