Saudi tycoon Adnan Khashoggi has agreed to pay up to $35 million to Triad America Corp., his bankrupt U.S. holding company, under a tentative settlement reached by attorneys and trustees, a newspaper reported.
Danny Kelly, a lawyer for Triad America trustee R. Todd Neilson, declined to comment on the size of the settlement, but anonymous sources quoted in the Salt Lake Tribune on Monday said the amount was $30 million to $35 million.
"I think it is the best settlement we could have gotten, and I don't think there was any money left on the table," Neilson was quoted as saying. "I'm basically pleased we were able to secure this money. We started this estate without a single dollar in it, and we will end up with millions of dollars to pay creditors."
Triad America, a holding company of Khashoggi and his brother Essam, and eight affiliated companies filed for protection under Chapter 11 of the U.S. Bankruptcy Code in January, 1987, listing liabilities of $197.5 million and assets of $9.5 million.
Hunts for More Money
The tentative settlement, reached Friday after a day of negotiations and subject to approval by U.S. Bankruptcy Court, would allow unsecured creditors to be paid 40 to 50 cents on the dollar, barring any unforeseen complications, Kelly said.
Triad America's major unsecured creditors include Sheraton Corp., Texaco Inc. and the Energy Department. In addition, 20 other unsecured creditors have claims of more than $1 million, Kelly said.
He estimated Triad's and its affiliates' debt to creditors at $50 million to $75 million.
"We are not done looking for other money to repay creditors," Kelly said. "There are potentially other sources of money to enhance this. This still is not in a bank account in Utah, and a lot of things still could happen."
Kelly said the trustee must satisfy certain conditions before Khashoggi is obligated to pay the money, but he would not comment on those conditions.
The $30 million to $35 million would go to the bankruptcy estate of Triad America.
"The trustee's intent ideally would be to get an interim distribution to creditors as soon as possible," Kelly said. But the bankruptcy court first must determine which creditors have legitimate claims.
"It still could be years before the case is actually closed and final payments are made," he said.
The tentative agreement would settle a lawsuit filed against the Khashoggi brothers by Neilson in October, 1987. The suit, which also named more than 40 companies directly or indirectly owned by the pair, sought $239 million in actual damages and $800 million in punitive damages for breach of contractual obligations and fiduciary duties.
Adnan Khashoggi indirectly owns 80% of Triad America, while Essam Khashoggi indirectly owns 20% of the company.
Will Release Lien
Triad America obtained a court order freezing the Khashoggis' assets in the United States and attaching specific U.S. assets, including a $51.5-million judgment against Northrop Corp.
The order, Neilson said, was "clearly what brought them to the table." The company's lien on the judgment will be released "the minute the money hits our account," he said.
The judgment against Northrop, the Los Angeles-based aircraft and arms manufacturer, stemmed from commissions on sales to the Saudi air force and interest.
Northrop has been in litigation with Adnan Khashoggi over the commissions for years. The U.S. Supreme Court refused to hear an appeal by Northrop last year. But Kelly said: "Northrop still had some alternatives and theoretically could have tried to get out from the judgment."
The Triad America settlement follows negotiations over a tentative settlement with Northrop, in which the company would pay $48.5 million. But Dan Berman, Khashoggi's local attorney, said the two agreements were not connected.