Gradco Systems Splits Into 2 Subsidiaries : Restructuring: The maker of paper-handling equipment seeks easier access to capital markets in Japan and the U.S.

Gradco Systems, a maker of paper-handling equipment for office copier machines, said Monday it has restructured its operations into two independent companies and secured a $35-million line of credit.

Keith Stewart, chairman and chief executive officer, said in a statement that the company has divided its operations into two subsidiaries, Gradco Printer Systems and Gradco Japan.

He said the company, which in January reported an unexpected loss of $1.4 million on revenues of $20.5 million for the third fiscal quarter ended Dec. 31, also obtained a credit facility from the Bank of California and the Mitsubishi Bank.

Stewart also said the company would take a one-time charge to earnings in its fourth quarter related to the closing of its 100-employee manufacturing plant in Santa Ana.

The amount of the charge will be determined later, but Gradco officials earlier said it would be in the $10-million neighborhood.

“The two independent companies will enable us to look to both the U.S. and Japan capital markets for new equity financing through both private and public sources, without causing conflicts between the longer-term interests of the Japanese investor and the more short-term interest of the typical U.S. investor,” Stewart said in the statement.

Company officials could not be reached to comment on the release.

The restructuring is aimed at reducing Gradco Systems’ dependence on paper sorters and feeders, which account for nearly three-quarters of company revenue. It effectively leaves Gradco Systems a holding company for the operating entities, doing some basic research and development and corporate finance and acquisition functions.

The credit arrangement apparently ends a financing search that the company began last year.

In December, a management buyout attempt by Stewart failed when potential Japanese investors grew skittish and the company was unable to line up financing.

The company has blamed its recent financial setbacks on the loss of a major contract with Xerox Corp., product delays on the part of the copier manufacturers and problems with getting its own printer products on the market.

As part of the restructuring, Gradco Printer Systems will be a wholly owned subsidiary of the company and will be responsible for all of Gradco’s printer-products business worldwide, including engineering, manufacturing and sales.

Joe Sanchez, a former Xerox Corp. executive, has been appointed as a director, president and chief operating officer of Gradco Systems, and president and chief executive officer of Gradco Printer Systems.

Mark Takeuchi, a former C. Itoh & Co. executive, has been appointed as a director of Gradco Systems. He is president of Gradco Japan Ltd. and senior vice president of Far Eastern operations and business development of Gradco Systems.

Gradco Japan, which will be owned by Gradco Systems, and with 4% percent-owned by unnamed Japanese investors, will be responsible for all Gradco’s copier business worldwide, including engineering, manufacturing and sales.