Mk Wants Stockholders To Step Aside Troubled Firm Says Sacrifice Is Only Way To Ensure Survival

Financially beleaguered Morrison Knudsen Corp. will ask 7,000 shareholders to give up virtually everything they own of the company in order to save it.

The Idaho Statesman reported that the plan to essentially transfer control of the one-time international construction and engineering giant to its creditors will be carried out over the next six months and is the best chance for the company’s survival beyond Sept. 30.

The newspaper based its report on interviews and internal corporate documents.

Morrison Knudsen has not officially estimated the size of the loss to the holders of 33 million shares of its common stock although it has acknowledged the value will be substantially reduced.

If creditors, and a bankruptcy judge, agree to the previously announced debt-for-equity swap, creditors will be given enough shares to at least control, if not outright own, Morrison Knudsen in return for canceling their $330 million in secured debts and potential liabilities.

Chairman Steve Miller and Chief Executive Officer Bob Tinstman are talking about the details now because they need to convince stockholders to surrender their ownership.

Officials say enough of the 30 creditor companies that must unanimously approve the swap have expressed interest in the idea to make it appear viable.

“They agree there is value in the company” that is greater than if it were broken up by a bankruptcy court and sold off in parts, corporate spokesman Brent Brandon said.

Under the plan, creditors most likely will get 100 percent of the equity. Existing shareholders will get five-year warrants for 10 percent that an expert described as the right to buy new shares only after the shares had reached a street value high enough to cover the debt canceled by the creditors.