Karcher’s Debt Eased by Investors : Finance: Four O.C. businessmen will pay off his $4.8-million loan in return for stake in fast-food company and role in ongoing board battle. Company founder still owes $25 million.

Embattled Carl N. Karcher won an apparent reprieve on Wednesday when four Orange County businessmen agreed to pay off a $4.8-million bank debt that was threatening to topple the fast-food magnate’s personal fortunes and his chances of regaining control of Carl’s Jr.

In return, the investors--led by title insurance industry executive William P. Foley II--would get 641,000 shares of Carl Karcher Enterprise stock and land themselves in the thick of a stormy public feud that led company directors to oust founder Karcher as chairman Oct. 1.

Foley, who said he has known Karcher socially for years, declined to say what role the new investors might play. He described the acquisition as “an investment” and said, “I hope I can help to facilitate a reconciliation between Carl and the board.”

Besides Foley, chairman of Fidelity National Financial Inc., an Irvine title insurance company, the investors are Richard Pickup, a broker with Wedbush Morgan Securities in Newport Beach, who already holds more than 1 million shares of Carl Karcher Enterprises; businessman Rod Lane, and William Davenport, a broker with Kidder Peabody & Co. in Newport Beach, who helped arrange the transaction.

The deal with Commercial Center Bank in Santa Ana--to be completed as soon as today--would give the new investors about a 4% share in the company and reduce Karcher’s personal holdings to about 30% from 34%. Still up in the air is how Karcher will deal with another $25.1 million in overdue bank loans. Karcher has pledged much of his remaining stock to Union Bank as collateral against a loan, which is also in default.

Davenport, a longtime investor in Karcher Enterprises, said the deal was pieced together last week. “This is a win-win situation for Carl, the bank, the four investors, the company’s management and the company’s shareholders, who were deeply concerned about the fate of that large block of stock overhanging the market.”

The agreement drew only limited comment from Karcher himself and from his adversaries at the company.

Karcher described Foley as “a fine gentlemen who’s done a great job with his company,” but declined to comment on the role that Foley or the other investors would play in his feud with the fast-food company’s board. “I’ve been sworn to secrecy,” Karcher quipped.

Karcher Enterprises spokesman Roger Pondell also declined to comment on the deal, other than to say that the company “was not presented the opportunity to buy any of the stock” from Commercial Center Bank.

“At this point, our feeling is that this is an issue between the bank and Mr. Karcher,” Pondell said. The company earlier had offered to acquire the shares if they became available for sale.

Karcher spokesman Steven Fink said Wednesday that “significant progress is being made with Union Bank, and negotiations are continuing in good faith.” Unlike Commercial Center Bank, Union Bank has not yet threatened to sell off Karcher Enterprises shares--in this case 3.98 million of them--that Karcher used to secure the loan.

Foley said that he will acquire 400,000 shares backing the Commercial Center loan “at a slight discount to the market price” and that the remainder would be split among the other investors. Foley said that the businessmen are acting separately, not “in concert,” to buy the shares.

In over-the-counter trading Wednesday, Karcher Enterprises’ stock price fell 37.5 cents to close at $7.625.

Pickup, who has held Karcher Enterprises shares for at least a year, has not said which side he would support if the 76-year-old company founder makes good on his promise to initiate a proxy fight against his handpicked board of directors.

Lane, who is chairman of Lane/Kuhn Pacific in Newport Beach, lives in the community of Emerald Bay at the northern end of Laguna Beach. He was U.S. Olympics baseball commissioner during the 1984 Summer Games in Los Angeles and is member of Hawaiian Airlines’ corporate board. Lane also is a trustee of USC, where he went to school and played baseball in the 1950s.

Karcher said that although he has known Foley for years, they had not discussed Karcher’s or the company’s financial woes until a lunch six weeks ago. Asked if the deal signals the start of better times for his flagging personal finances, Karcher responded, “I certainly hope so.”

Karcher has linked his deepening financial problems to the board’s decision late last year to reject a proposed leveraged buyout that would have given him cash needed to pay off his now-defaulted bank loans. Board members rejected Karcher’s $9.50-per-share bid, made in conjunction with a Los Angeles-based investment firm, saying the company was worth more.

The company and Karcher subsequently failed to complete a pair of deals that would have allowed the founder to exchange company shares for as much as $16 million.

Karcher, who has made significant investments in real estate, has seen his personal wealth eroded by the stalled Southern California economy. And, he has watched as the value of his company stock fell from about $100 million more than a year ago to about $50 million based on the company’s recent stock performance.

Karcher has asked a majority of the board’s outside directors to resign. The board responded two weeks ago by forcing Karcher, who remains a director, out as chairman and replacing him with board member Elizabeth A. Sanders.

Last week, Karcher alleged that the board conspired with company President Donald E. Doyle Jr. to force him from office. The feud was sparked when the board rejected Karcher’s proposal to test market another company’s Mexican-style food products in a handful of Carl’s Jr. restaurants.

Stan Pawlowski, president of Corporate Bank in Anaheim, said the deal bodes well for his longtime friend Karcher.

“If he gets this (loan) done it’s an indication he may be able to put the other one together,” Pawlowski said. “By eliminating this part of the financial problems he’s made the other one easier to deal with.”

Pawlowski said it was merely a matter of time before Karcher found a way to deal with the most pressing of his financial worries. “People like Carl and want to help him,” Pawlowski said. “These (investors) are people of high stature, with an ability to come up with this type of dollars.”

Karcher’s next task, Pawlowski said, is to deal with the Union Bank loan. “It’s a tough one,” Pawlowski said. “Say for example, he could pay off $5 million of the ($25.1-million) principal, you might get the bank to go along. Then you need to get a long-term plan, a total program.”

Karcher has been on the minds of many Orange County residents lately, said Larry H. Friend, president of L.H. Friend, Weinress & Frankson Inc., an Irvine securities firm. Friend said he has had several conversations with Karcher in recent days about potential investors who had surfaced.

“You get 10 different people coming at you, you need somebody to centralize all of this,” said Friend. “I’m just trying to help. I’m not involved with the stock (deal) at all.” Friend said he wanted to assist Karcher because “I just felt it wasn’t right what happened to him. I just didn’t like it, for a man to go out like that.”

Times staff writer Chris Woodyard and correspondent Debora Vrana contributed to this report.