O & Y Owners Offer to Cut Their Stake

The Reichmann family of Toronto, one of the world’s wealthiest, has offered to give up a portion of their personal investments in order to rescue their Olympia & York real estate empire, company President Gerald Greenwald said Thursday.

Greenwald made the announcement as he unveiled the outlines of a restructuring plan to be presented in bankruptcy court today, the deadline for the proposal.

The company’s plan also includes distribution of up to 80% equity in O & Y. The company also would continue to manage its principal real estate holdings and has devised 27 separate plans tailored to specific creditor groups.

“The purpose of the plan is to permit the continued operation of Olympia & York in order to enhance values and enable the company to honor obligations to all of its creditors,” Greenwald said.

“The plan is equitable, realistic and beneficial to creditors.”

The proposal now will go before Ontario Judge Robert Blair, and the company’s creditors have to approve it.

Steve Miller, the Reichmanns’ chief debt negotiator, said the main thrust of the plan would retain the principal assets of the company for five years. In turn, lenders would have to refrain from receiving full interest on their loans or bonds for five years “while the company manages the assets back to their logical long-term value,” he said.

“We believe that is a far better outcome for all concerned than the immediate bust-up and liquidation of the company.”

The family has offered to transfer its 20% interest in the U.S. real estate operations of O & Y and its interest in R. F. Real Estate Investments Inc. in exchange for increased equity in the restructured company. R. F. Real Estate is a Toronto holding company for four Toronto-area developments.

One banker, speaking on condition he not be named, declined detailed comment on the plan, except to say, “They’ve got a ways to go.”

An O & Y analyst questioned how much value the Reichmanns still had in their U.S. properties, given the severe slump in property prices.

O & Y didn’t immediately respond to a telephone inquiry about the estimated market value of the Reichmanns’ contribution to a restructured O & Y.

Greenwald said Paul Reichmann and his brothers were making the investment in O & Y “to demonstrate their confidence . . . that this will be a company that will become quite successful again.”

He noted that over the last 18 months, the family has made several cash infusions into the company.

Under the company’s restructuring plan, at the end of the five-year period, any remaining unsecured debt would be converted into additional stock in O & Y--up to a maximum 80% stake in the company.

The plan isn’t intended to be the final version, but reflects the current negotiations with O & Y creditors and will be finalized when negotiations are concluded, he said.

Miller said that once negotiations are complete, the company could present a detailed five-year business plan.

Based on proposals now, he said, that plan would entail cuts in pretax general and administrative costs to an annual rate of $25 million dollars, which he said was down 70% from previous levels.