Wang Says It Will Suspend Debt Payments : Step Intended to Pressure Lenders for New Credit
Wang Laboratories Inc. said Wednesday that it will suspend payments on $208.6 million of institutional debts, an apparent step to give it a stronger hand in negotiations with its bank lenders.
The cash-short computer giant has been trying to negotiate a new line of credit with a group of eight banks, led by Bank of Boston, to replace a $300-million credit line that expires Sept. 30.
By suspending payments on the $208.6 million of commercial paper and bank notes, it is putting more pressure on the eight bank lenders, since those banks also hold some of the securities in question.
“I think it’s fairly straightforward that they’re calling the bluff of their banks, playing hardball,” said John W. Adams, chairman of Adams, Harkness & Hill in Boston.
Loss for Year
Wang reported a $424.3-million loss for the fiscal year that ended June 30, and had speeded up plans to lay off more than 2,200 workers by Sept. 30.
An Wang, the founder, chief executive and chairman, has recently undergone treatment for cancer. Last week, in an unexpected move, his son and heir apparent, Frederick A. Wang, stepped down as president and chief operating officer.
Wang has $962 million in short- and long-term debt altogether and is trying to restructure all of it.
Wang stock fell 50 cents a share to $6 a share on the American Stock Exchange.
Company Chairman An Wang said in a terse statement that the company would suspend principal and interest payments on certain institutional debts.
Negotiations Difficult
Paul Henning, director of investor relations, said later that the freeze would apply to $125 million of commercial paper, as well as $83.6 million in notes payable to banks.
Henning said the negotiations had been “long and difficult and arduous and complex.”
“When you’re dealing with a consortium of eight banks . . . getting nine parties to come to an agreement gets complex,” he said.
Henning stressed that the move applied only to institutional debts, and said the company intended to remain current on all other obligations, including trade credits, operating costs, vendor bills, customer service and overseas operations, while negotiations continue.
Adams said despite those woes Wang’s balance sheet at year-end was “a fairly strong one.”
Action Not Unprecedented
“That, particularly as modern balance sheets go, is a pretty bankable situation,” he said. “It doesn’t reflect tremendously well on the banking group if, with that balance sheet, they can’t put together a lending agreement and a loan.”
Adams added, “They sure have cast down the gauntlet.”
Another analyst said Wang’s action was unusual but not unprecedented.
“They’re saying well, we don’t like the new terms and we don’t have the funds to pay you under the old terms,” said Fred Pastore, vice president with Moody’s Investors Service in New York. But he added, “Certainly if a company can’t pay its bills and meet the terms of its original obligation to the banks, that doesn’t look good.”
