Beleagured Morrison Knudsen Corp. says it has reached an agreement with lenders that will provide $30 million in new borrowing capacity and stave off Chapter 11 bankruptcy filing.
Morrison Knudsen has been on the brink of filing for bankruptcy protection to allow financial reorganization, after reporting a $350 million loss for 1994.
Company officials said the agreement announced Friday, plus the sale of non-core assets, should provide operating capital through the end of next year.
Chairman and Chief Executive Officer William Agee was ousted in February after his strategy of moving the worldwide engineering and construction company into the transit industry backfired and generated huge losses.
“We’re not out of the woods yet, but this is the chance we’ve been waiting for,” said Robert S. Miller, board chairman.
“When implemented, the understanding will provide MK with the cash and time to proceed with our business restructuring and the sale of non-core assets, as well as to pursue new sources of capital,” Miller said.
The understanding, approved Friday by MK’s board of directors, is conditional upon a number of things, including resolution of the liabilities of the company’s Transit Group. The Transit Group contributed two-thirds of the 1994 loss, $224.7 million.
Most of the loss came from transit-car contracts that were underbid as Agee tried to make Morrison Knudsen a major player in that industry.
The new understanding with the bank group steering committee representing lenders will extend through the end of 1996.
“The company believes the arrangement will provide sufficient liquidity until the latter part of 1996 when a substantial recapitalization through an equity infusion of new debt will be required,” the company said in a prepared statement. “The understanding contemplates the establishment of a new bonding capacity and the issuance of common stock warrants to the bank group.”
The company lost $349.6 million, $10.75 per share of common stock, in 1994 including $315.6 million, $9.64 per share, in the fourth quarter.