Baltimore Orioles owner Eli S. Jacobs has surrendered most of his holdings in Dallas-based Triangle Pacific Corp., marking the second time this year that he lost control of a major investment foundering in debt.
Mr. Jacobs' stake in the company, one of his biggest known investments, was cut to about 3 percent from 97 percent when the company restructured $237.5 million of debt, according to documents filed with the Securities and Exchange Commission in recent weeks.
The plan, completed in June but made public in filings only last month, also stripped Mr. Jacobs of management fees and chairmanship of the company, and canceled repayment of loans he made in 1990 to keep the company afloat.
"It's a significant hit -- it's a significant loss for him," says Gregory Smith, president of InDepth Data, an investment research firm. "But given the possibilities and the surly nature of creditors these days, he probably did pretty well."
The restructuring is another sign of financial troubles for the Orioles owner. Over the past six months, three banks -- Mercantile-Safe Deposit and Trust Co. of Baltimore and New York's Berkshire Bank and Manufacturers and Traders Trust Co. -- have sued Mr. Jacobs to recover $27 million in unpaid loans. The cases are pending.
In July, Mr. Jacobs told some lenders in a letter that his portfolio was not generating enough cash to meet all his obligations. He said he would stop making interest payments on some loans while he restructured his business empire.
Last year, Mr. Jacobs said he was considering offers for the Orioles. He cited his discomfort with publicity and demands on his time as reasons, and said that selling the team would not be prompted by financial need. He has since declined to talk about the possibility of a sale.
Gauging the financial impact on Mr. Jacobs of the Triangle Pacific restructuring is difficult because it is a private company. The SEC documents do not show how much of his own money Mr. Jacobs put into Triangle Pacific, or how much he received in transaction fees or management fees over the years.
Mr. Jacobs and Triangle Pacific executives declined to comment.
In a similar restructuring this year, Mr. Jacobs saw his holdings inanother corporation slashed. Memorex Telex Corp., a computer company Mr. Jacobs formed in a 1987 merger, filed a bankruptcy plan in January that cut Mr. Jacobs' stake to 1.8 percent from 35 percent.
Triangle Pacific, which employs 100 workers at a distribution center in Beltsville and 3,421 workers nationwide, is one of the nation's largest makers of wood flooring and kitchen and bathroom cabinets. Last year, Triangle Pacific posted a loss of $43.6 million on sales of $256 million.
The company was purchased for $200 million and taken private in 1986 by a group of investors. Two years later, it was sold again, to a group led by Mr. Jacobs for an undisclosed price. The two buyouts left the company with $475 million in debt as of the beginning of 1992, and interest payments that last year totaled nearly $60 million.
A slump in the housing market, combined with the heavy debt burden, resulted in a $43.6 million loss last year and forced the company to default on several loans, notes and other obligations, company officials said in the SEC documents.
By cooperating with lenders, Mr. Jacobs kept Triangle Pacific out of bankruptcy proceedings, says Einar Hafstad, who represented a major creditor, Cargill Financial Services Corp., in the restructuring negotiations.
In exchange for their debt, creditors accepted newly issued stock and restructured loans and became controlling shareholders. Because the stock was a new issue, it had to be registered with the SEC, prompting the public filing.
Mr. Jacobs received 3 percent of the new stock in exchange for $10.3million worth of deferred fees, notes and other obligations owed to him by the company.
He also received the right to purchase for certain fixed prices more shares of stock that would, if he exercised the options, raise his holdings by another 1.2 million shares, or slightly more than 10 percent of the company, according to documents.