Ailing Sunbeam Seeks Chapter 11 Protection
Sunbeam Corp., burdened by heavy debt, shareholder lawsuits and a probe into its accounting practices, filed Tuesday for Chapter 11 bankruptcy protection.
The maker of Sunbeam appliances, First Alert smoke alarms and Coleman camping gear said it does not anticipate any work force reductions or plant closings as it reorganizes.
“This was a difficult, but absolutely necessary decision for us to make,” Chairman and Chief Executive Jerry Levin said. “It is, in fact, the only option that will free Sunbeam from its overwhelming burden of debt and securities-related litigation expenses.”
Most of the debt was taken on to finance acquisitions by former Chief Executive Al Dunlap.
Sunbeam said its banks have agreed to provide it with a new $285-million line of credit, and it has received a commitment from General Electric Co.’s GE Capital Corp. for a new $200-million accounts receivable financing program for its domestic businesses.
Levin said Sunbeam hopes to emerge from the bankruptcy proceedings in six to nine months as a “stronger, more competitive company.”
Sunbeam has blamed its recent poor performance on customers no longer buying generators and outdoor equipment in preparation for possible Y2K power outages, but the company has been suffering for years.
It lost $299.5 million on sales of $2.4 billion in 1999.
In June 1998, Sunbeam’s board ousted Dunlap amid a plunge in sales and profit.
Dunlap, author of “Mean Business,” a book of corporate war stories and get-tough remedies for distressed companies, joined Sunbeam in 1996 and followed through as expected by cutting 6,000 jobs, firing top managers, shutting or unloading 80 factories, and selling divisions.
The restructuring and strong sales and profit gains during 1997 lifted Sunbeam’s shares to a high of $53 in March 1998, more than 100 times the 51 cents the stock closed at Monday on the New York Stock Exchange.
But dozens of shareholder lawsuits claimed that the profit surge was an accounting mirage.
Dunlap also oversaw the acquisition of several properties such as the camping equipment maker Coleman Co. he bought from Ronald Perlman, a financier who controls Revlon.
The deal added mightily to Sunbeam’s debt, now totaling more than $2.5 billion, according to the company’s filings with the Bankruptcy Court in New York.
Just months after the Coleman deal closed in March 1998, Sunbeam’s accountants refused to sign off on the company’s books. Eventually, after Dunlap and other executives left in June 1998, Sunbeam restated six quarters of results, wiping away $61 million in reported profit.
The accounting furor also prompted inquiries by regulators. Sunbeam said in November the Securities and Exchange Commission had recommended as yet unspecified penalties against the firm.
The company, based in Boca Raton, Fla., said it expects to discharge its securities-related litigation and bondholder debt as part of the Chapter 11 process.
