Judge Rejects Walden’s Plan to Revive Troubled Helionetics

Former Helionetics Chairman Bernard B. Katz’s plan to lead the company out of bankruptcy advanced Thursday when a federal judge rejected a competing plan proposed by former Helionetics executive Richard A. Walden.

At a 6-hour hearing Thursday in Santa Ana, Judge John E. Ryan ruled that Walden’s proposal failed to meet federal requirements that would have allowed him to approve it over the opposition of Helionetics’ secured creditors.

The elimination of Walden’s plan leaves only the proposal by Katz and Charles W. Jobbins, a former Helionetics president. Four plans were originally submitted to the court.

A hearing on the Katz plan is scheduled for Jan. 9.

Helionetics, once a high-flying defense electronics firm in Irvine, has been operating under a Chapter 11 bankruptcy reorganization since July, 1986.

At one point, the Walden plan appeared to have the best chance of winning court approval, in part because Walden had the key support of Bank of America, which is owed about $12.5 million by Helionetics.

But at a hearing earlier this month, Bank of America decided to change its vote and instead back the Katz plan. And Downey Savings & Loan Assn., which originally voted for none of the plans, said it,too, favored the Katz plan.

Joel Weinberg, a Bank of America attorney, said at the time that the bank decided to change its vote because it doubted Walden’s claims about the value of a promissory note that Walden would use to pay creditors.

But William N. Lobel, an attorney for Walden, said Bank of America and Downey Savings decided to change their votes because they had reached an agreement with Katz to settle several lawsuits between Katz and the two institutions.

The Katz plan proposes that all litigation between himself and the Bank of America and Downey Savings involving Helionetics be dropped.