L.A. Firm to Acquire Troubled Northview
Debt-ridden Northview Corp., which earlier this year cut its last remaining ties with convicted arbitrager Ivan Boesky, on Monday signed a letter of intent to be acquired by Calmark Financial Corp. in a deal valued at $52.8 million.
According to the preliminary agreement, Northview would be acquired by Calmark, a privately held, Los Angeles-based real estate syndicator. The San Diego-based hotel chain would simultaneously pay $22 for each share of its 2.4 million outstanding common shares, according to the agreement. Northview, which operates the Vagabond Hotel chain, closed at 16 3/4 in over the counter trading Monday. The stock had traded at about 10 for the last few weeks.
The proposed deal is subject to approval by Northview’s board of directors and the execution of a definitive agreement.
Calmark, which develops, manages and syndicates multi-family residential real estate projects, also owns 90% of American Adventure, a company that operates campgrounds in nine states.
Northview reported a $3.4-million net loss and $19.8 million in revenue for the first half ended June 30. Additional losses are anticipated during the remainder of the year because of interest payments on the company’s $100 million in debt. That debt load includes $70 million in 15% subordinated debentures floated to finance Boesky’s stock trading.
High Interest Payments
The company expects to pay $13.5 million in interest this year alone to service that debt. Refinancing of the 15% debentures has not been possible because of uncertainties created by three lawsuits generated by Boesky’s arbitrage activities.
In May, Northview Chairman Robert Loeffler said the company hoped to use a $90-million cash hoard to finance the acquisition of a “cash cow” that would replace Boesky’s profitable mortgage banking and arbitrage operation. That arbitrage business generated $10.6 million in operating profits during 1986, compared to just $7 million in operating income generated by 43 Vagabond Inns in California and the Southwest.
The arbitrage cash flow ended earlier this year after federal regulators ordered Boesky to wind down his arbitrage activities. The order was part of a settlement of the government’s charges that Boesky engaged in illegal stock trading based on insider information.
Company observers were surprised by Northview’s decision this past spring to make an acquisition, largely because Loeffler, Northview’s recently elected chairman of the board, was seen as a likely candidate to liquidate or sell off Northview’s assets.
That expectation surfaced because of Loeffler’s past experiences with troubled firms. He served as the court-appointed trustee for Equity Funding Corp. of America during the 1970s. During the early 1980s Loeffler served as a court-appointed trustee in the Wickes Cos. bankruptcy.
