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Business Planning Keyed to Gevurtz
Wieboldt Stores, Inc. v. Schottenstein
Citation:
94 B.R. 488 (1988)Facts
Wieboldt Stores was a Chicago-based retail chain founded in 1883 that had fallen on hard times by the 1980s due to demographic changes, increased competition, and poor management. By 1985, Wieboldt was insolvent and unable to meet its obligations. In 1982, the Trump brothers had acquired 30% of Wieboldt’s shares and later conveyed half to Jerome Schottenstein and his affiliates, making them controlling shareholders. In November 1985, WSI Acquisition Corporation (WSI), a corporation formed solely to acquire Wieboldt, commenced a tender offer for all outstanding Wieboldt shares at $13.50 per share. The tender offer was financed through loans from various lenders, with Wieboldt’s assets pledged as collateral. WSI obtained financing from Household Commercial Financial Services (HCFS), BA Mortgage and International Realty Corporation (BAMIRCO), and General Electric Credit Corporation (GECC). To free up Wieboldt’s assets for use as collateral, WSI arranged for the sale of Wieboldt’s One North State Street property. By December 20, 1985, WSI had acquired 99% of Wieboldt’s stock for approximately $38.5 million. After the LBO, Wieboldt was left with substantially all its assets encumbered by mortgages and liens, and with no additional working capital. Unable to sustain its business, Wieboldt filed for bankruptcy in September 1986.
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