Company’s Plan Creates Stockholders : Bankruptcy: Bus shelters purchased by investors in Metro Display Advertising would be turned into shares under reorganization proposal to be submitted to court.

Hundreds of individual investors who bought bus shelters from Metro Display Advertising will become shareholders under a reorganization plan to be submitted to U.S. Bankruptcy Court later this month, lawyers said Monday.

The plan would convert the shelter investments, which originally sold for $10,000 each, into shares of stock in the privately held bus shelter company in Tustin.

“It will be a lot better from a balance sheet standpoint,” said Marc Tow, bankruptcy lawyer for Metro Display, because it will eliminate debt. The company will no longer be liable for monthly payments and a buy-back deal on investors’ shelters. Instead, the investors would own common stock with no guaranteed investment return.

He said the plan would be filed by May 24 in bankruptcy court in Santa Ana, where Metro Display petitioned for Chapter 11 reorganization in January.

The company filed for bankruptcy as the Securities and Exchange Commission began an investigation into alleged investment fraud. The FBI raided the office and home of onetime company president Jean Claude LeRoyer. But 1,055 investors, by the company’s count, joined ranks in an attempt to rescue the company and protect their outlays rather than accept an SEC request for a court-appointed trustee.

Recovery has been difficult. Hit with a cash crunch, the company has been seeking easier payment terms from 50 cities and counties where it has bus shelters. One city, Garden Grove, has voted to cancel its contract with Metro Display because of disputes over payments.

On Monday, a judge agreed to delay the infusion of another $500,000 to $800,000 from the company’s largest investor to cover short-term operating costs. The investor, Allan Ross of La Jolla, already has sunk more than $1 million in Metro Display.

Leonard M. Shulman, a lawyer representing the investors, said the cash infusion will not be needed until the judge approves the reorganization plan. Despite his already sizable investment, Ross is prepared to put more money into Metro Display because he believes that the company can be a success, according to Shulman.

“He really believes in the business,” Shulman said. “He believes in the concept of the bus shelters. And he believes that with the debt-for-equity swap, the company will be not only healthy from a balance sheet perspective but will be able to concentrate on the sale of advertisements.”

Metro Display, one of three major bus shelter companies in Southern California, sells the panels in bus shelters to advertisers. Shulman said ad revenue has increased since the bankruptcy filing in January, compared to the same period last year.