Malibu Grand Prix, a Woodland Hills-based operator of amusement parks, completed a complex debt restructuring that it hopes will enable its common stock to be relisted on the over-the-counter market's NASDAQ system.
The restructuring also could provide $300,000 a year in dividends for Intercoastal Properties, a commercial real estate firm owned by Malibu Chairman Ira L. Young, in exchange for Intercoastal's agreement to cancel $5 million of Malibu's debt. Young also controls Malibu with a 57% voting stake.
Malibu operates 39 recreation centers, including miniature golf courses and auto racing tracks. Although profitable now, the company in recent years has struggled under a heavy debt burden that at times exceeded its assets, producing a negative net worth.
In November, 1984, Malibu's stock was delisted from NASDAQ--the National Assn. of Securities Dealers' Automated Quotation system, which is the principal source of price quotes for the over-the-counter market--because Malibu's net worth had fallen below the $375,000 minimum required by NASDAQ.
Malibu's stock has continued to trade in the less automated, non-NASDAQ sector of the over-the-counter market, and closed Friday at 50 cents a share bid.
Since it was delisted, Malibu has been restructuring its debt, and a major part of that effort came in early 1987. At the time, Malibu owed $14.4 million to Bracton Corp., a finance company. According to Gary Rudolph, Malibu's executive vice president, Malibu asked Bracton if it would sell the note to Intercoastal for $8.7 million in cash--or 60 cents on the dollar. Bracton agreed.
Malibu then borrowed $9 million from Union Bank and turned $8.7 million of that loan over to Intercoastal, which in turn paid Bracton for the note. So instead of owing Bracton $14.4 million, Malibu now owed $9 million to Union Bank and $5.7 million to Intercoastal.
As part of this agreement, Union Bank required Young, Intercoastal and Praxis Corp., another company owned by Young, to guarantee up to $4 million of the $9-million Union Bank loan. Young and his companies did so in part by pledging all of their stock holdings as collateral.
The parties also agreed, in effect, that if Malibu's operating performance improved, Intercoastal could cancel the remaining $5.7 million that Malibu owed on the note previously held by Bracton. Malibu's performance has improved, and last week Intercoastal canceled $5 million of that debt.
In the nine months ended Sept. 27, Malibu's after-tax operating earnings--excluding one-time gains and other special items--rose 43% to $831,000 from $582,000. Revenue climbed 7% to $9.6 million from $9 million.
Malibu now has effectively shifted the canceled $5-million debt from one part of its balance sheet to the other. It added the amount to its stockholders' equity, or net worth, which had been only $600,000. Now that its net worth is $5.6 million, Malibu plans to ask NASDAQ to relist its common stock.
Young and Intercoastal's willingness to erase the $5-million debt did not go unrewarded. Malibu last week gave Intercoastal a warrant that, if exercised, permits Intercoastal to buy 5 million shares of a newly issued non-voting, non-convertible preferred stock of Malibu for 50 cents a share.
The stock pays an annual dividend of 12%, or $300,000, on the entire $2.5-million worth of stock. And if Malibu decides to redeem the stock, it must pay $1 a share--which would give Intercoastal a 100% return on its investment. The warrant runs for five years.
Malibu, of course, still owes most of the $9 million it borrowed from Union Bank, and the company "is up to date with payments" on the debt, Rudolph said.