Gradco Systems Transferring Assets to Pay Off Debt
Gradco Systems Inc. said Thursday that it is proposing to pay off most of its current debt by transferring assets to its Gradco Japan unit and to remove former chief executive Keith B. Stewart as chairman of the subsidiary.
Bernard Bressler, corporate secretary for Gradco Systems, said the company plans to transfer most of its copier assets to Gradco Japan, which is majority-owned by Gradco Systems, in exchange for loans to pay off current debts.
Stewart resigned from Gradco Systems, an Irvine-based maker of products for copiers and printers, in October after his slate of board candidates was defeated by a slate led by Plenum Publishing Corp. Chairman Martin E. Tash in a bitterly contested proxy fight.
But Stewart retained his post as chairman of Gradco Japan. The new management wants to remove Stewart but needs a two-thirds majority of the unit’s board to do so, Bressler said. Stewart could not be located for comment.
The proposals are the latest moves by Gradco’s new board to turn around the struggling company. Last month, the company wrote off $20.8 million in assets as a charge against earnings in the quarter ended Sept. 30.
“We are doing what is necessary to get the company in good financial health,” Bressler said.
In exchange for the assets, Gradco Japan will lend the parent company $15 million to pay a $10-million secured debt to Bank of California, a $3.5-million secured debt to Teachers Insurance and Annuity Assn., and other smaller debts as well. The debts were declared in default in October.
Gradco Japan will also lend $2 million to the parent company in 1991, and it will purchase certain copier-related tools, dies and inventory for an additional $3 million payable in installments through the end of 1991.
The transaction will be put to a shareholder vote at the company’s next annual meeting in 1991. If approved, the loan will be canceled and the deal will be considered a sale of the assets. At that point, the parent company’s debt would be reduced from $17 million to $3.74 million.
In addition, Gradco Systems will sell 450,000 of its shares in Gradco Japan stock for $2.4 million to third parties in Japan, increasing Japanese ownership of the subsidiary slightly from 32%. Gradco Systems will remain the majority owner of Gradco Japan.
Gradco Japan will also convert a short-term loan to Gradco Systems to a long-term loan that is repayable from proceeds from Gradco Japan’s anticipated 1993 initial public offering in Japan or the year 2001, whichever is earlier.
Bressler said the company is exploring options for the remaining assets of Gradco Systems, including its money-losing printer systems business.
Gradco Systems’ stock fell 12 1/2 cents to $3 a share in over-the-counter trading on Thursday.
For the second quarter, Gradco Systems reported a loss of $23.6 million, contrasted with a loss of $106,000 a year earlier. Sales for the quarter plunged 24% to $18.4 million, compared to $24.3 million a year earlier.
