Former Boesky Firm Tied to Drexel Files Chapter 11

A company formerly headed by convicted stock speculator Ivan F. Boesky that operates the Vagabond motel chain has filed for protection from creditors in yet another Drexel Burnham Lambert junk bond deal gone sour.

Northview Corp. in Los Angeles, which defaulted on $100 million in junk bonds in September, listed $141 million in debts and $128 million in assets in a petition filed Tuesday in U.S. Bankruptcy Court in Los Angeles. Two affiliated companies, Calmark Motel Holding Corp. and Calmark Hospitality System, filed petitions as well under Chapter 11 of the federal bankruptcy code.

Northview, which operates about 40 Vagabond motels, is owned by Calmark Holding, a closely held real estate development company in Los Angeles that bought Northview for about $60 million in 1987. In that deal, Calmark inherited about $100 million in junk bonds that Drexel issued in two offerings for Boesky in 1983. The money was largely used to finance the stock speculator’s trading activities.

Northview is one of a number of Drexel clients that have sought bankruptcy protection recently. Last month, for example, Integrated Resources, a New York financial services firm, filed for Chapter 11 protection. Drexel itself collapsed last month and filed for bankruptcy protection.

Boesky was forced to sever his ties to Northview in 1987 after settling insider trading charges with the Securities and Exchange Commission. Even though he is no longer affiliated with Northview, his wife, Seema, is listed as a creditor for an undisclosed amount as trustee for their four children.

Theodore B. Stolman, a bankruptcy lawyer representing Northview, confirmed that units of First Executive Corp., a Los Angeles insurance firm with close ties to Drexel, are the largest holders with about $18 million in the bonds.

First Executive Chairman Fred Carr said he did now know how much the firm held and would check on it, but he did not call back.

Stolman said that even though Northview defaulted on the junk bonds, the bankruptcy filing was not forced by the holders and Northview is trying to reach an agreement on a financial restructuring with its bondholders.

Instead, he said, the filing came about because Northview was unable to make special payments beyond the base rent that it pays on its motel properties. Those payments are based on how much business the motels do, he said. Stolman said other Calmark operations are not affected by the Northview filing.

Calmark Holding, which did not file for Chapter 11 protection, is led by Uri Scheinbaum, its chairman and controlling shareholder, and Donald J. Brumlik, its president.

The controversial pair are probably best known for an unsuccessful, unsolicited $150-million bid made in 1988 for Arizona developer Del Webb Corp. They also once were involved in a proposal for a $400-million office and hotel complex in downtown Los Angeles next to the Los Angeles Convention Center.

In the Del Webb takeover fight, the Phoenix company sued Calmark, alleging that it failed to disclose key information in its Securities and Exchange Commission filings. Del Webb alleged that Calmark failed to disclose that Brumlik was disbarred in 1980, had filed for bankruptcy and was sued for failure to pay debts. Brumlik said he withdrew as an Illinois lawyer because he could not afford to fight disciplinary charges against him and acknowledged that he had some financial difficulties in the late 1970s and early 1980s.