Investor Group Seeking Deal to Control More Karcher Stock : Finances: Consortium wants to buy fast-food magnate’s $23.8-million bank loan that’s backed up with 3.9 million shares.
An Orange County investor group that last week paid off a $5.3-million personal loan for fast-food magnate Carl N. Karcher now wants to buy a troubled $23.8-million loan that is threatening Karcher’s personal fortune and his bid to regain control of the Carl’s Jr. restaurant chain.
The group, led by title insurance industry executive William P. Foley II, is negotiating to buy a Union Bank loan that Karcher secured with nearly 3.9 million shares of Carl Karcher Enterprises stock--about 20% of the fast-food company’s outstanding shares. Sources said Foley’s group wants to structure the deal in a way that would shelter Karcher from the hefty federal and state taxes he would have to pay if he sold the shares outright.
Foley has declined to comment on his plans. His group took control of 641,000 shares of Karcher Enterprises stock on Oct. 14, when it paid off a $5.3-million loan for Karcher. With those shares plus the stock securing the Union Bank loan, which is in default, the group would control about 23% of the fast-food company’s outstanding shares.
Other members of the group also would not discuss their plans, and it was not clear Friday whether the Foley consortium faces competition from other groups that have reportedly expressed interest in the shares that Karcher used to secure the Union Bank loan.
But sources said Friday that, if the deal is completed, Foley’s group will seek seats on Karcher Enterprises’ board. Those board members would evidently include Foley and another member of his investor group, as well as outsiders with fast-food industry experience.
Foley said earlier that he wants to mediate a resolution to the dispute between Karcher and current company President Donald E. Doyle, who is supported by five of the company’s seven board members.
Sources said that Foley, president of Fidelity National Financial Inc., an Irvine-based title company, doesn’t intend to invest in the company only to be drawn into the fight.
“The group wants to do this so it’s a win-win situation for Carl, the bank and its investors,” said a businessman who is familiar with Foley’s plan. “Whether this works out or not, I don’t know. But Bill Foley thinks it’s doable.”
Karcher, who has split with the board on strategy for the future of the Carl’s Jr. chain, was removed as chairman Oct. 1 and has threatened to initiate a proxy fight to regain control of the company, which he founded in 1941.
Karcher spokesman Steven Fink would not comment Friday on the Foley group’s plans. “All I can say is that negotiations are progressing with the appropriate parties,” he said. Karcher is struggling to regain control of his personal finances, which have been rocked by ill-fated investments and the stalled Southern California economy. Virtually all of the 5.4 million shares of company stock that Karcher holds are pledged as collateral on loans, according to a Securities and Exchange Commission filing made Friday by Karcher.
Karcher’s personal finances should benefit from a planned bond refinancing on a troubled apartment complex in Anaheim in which Karcher has invested at least $9.5 million, the SEC filing says. The Anaheim City Council is expected to approve the $26.9-million restructuring on Tuesday.
“This was a project that was losing money at (an 8.7%) interest rate,” said Andrew F. Puzder, Karcher’s personal attorney. “At 4%, it will be making money. . . . This is an erasure of a substantial drain on Carl’s finances. We’re trying to plug leaks, and this is a big leak--so it’s good news.”
Karcher, who has kept up with bond-interest payments, is delinquent on about $600,000 in back taxes on the apartment project. The refunding, if successful, would eliminate Karcher’s back taxes and various fees, said Elisa Stipkovich, Anaheim’s executive director of community development.
Refinancing “just made sense,” Stipkovich said. “We didn’t want to see this (project) go into further decline--it’s an important project in our city.”
The project includes about 400 low-income rental units that are near Karcher Enterprises’ headquarters in Anaheim. Karcher invested his money in the project “because it was important to show that this kind of revitalization works,” a Karcher spokesman said earlier.
In Friday’s Nasdaq trading, Karcher Enterprises stock gained 62.5 cents a share to close at $8.25.
Times staff writers Debora Vrana and James S. Granelli contributed to this report.
