KinderCare Files For Bankruptcy ProtectionMARVIN HARRIS , Associated Press
Nov. 10, 1992 8:18 PM ET
MONTGOMERY, ALA. MONTGOMERY, Ala. (AP) _ KinderCare Learning Centers Inc., America's largest child-care company, filed for bankruptcy protection Tuesday but said creditors have already accepted a plan for it to stay in business.
The company filed for protection under Chapter 11 of the federal bankruptcy code.
Chapter 11 freezes most debts, giving companies time to reorganize and arrange to satisfy creditors. KinderCare said creditors have tentatively accepted its reorganization plan, giving them control of most of its stock. The creditors will formally vote under the court's jurisdiction.
KinderCare spokesmin Alan Bromley said he expects the company's 1,250 centers in 39 states to continue operating as usual and that the 25,000 employees will continue to be paid in full and on time.
''The court today was unusually harmonious in that the creditors and KinderCare were working closely together to resolve the debt problem and to move the company forward,'' Bromley said.
Under the restructuring, KinderCare creditors will own 86.5 percent of newly issued common stock, the company said. In exchange, they will forgive about 60 percent of its debt, it said.
That reduces the company's long-term debt from approximately $590 million to $237 million, said KinderCare.
The three largest creditors, Trust Company of the West, Cargill Financial Services and Dickstein & Co. and their affiliates will own a majority of the common stock under the reorganization.
Current stockholders will collectively own 2.7 million shares of the 20 million primary shares of the company's new common stock. They will be issued warrants giving them the right to purchase an additional 3.8 million shares of stock at $12.52 per share.
That means that for each 100 shares of common stock now held, each investor will get about 5.26 shares of new stock and about 7.41 warrants.
The plan also calls for capital expenditures to double from 1992's $20 million to $40 million in 1999.
Payments to all trade creditors are current and KinderCare expects to pay them in a full on their usual terms, said Bromley.
KinderCare anticipates that most of its current board will continue to serve, with three new directors being named, Bromley said.
The company hopes to come out of bankruptcy by the March 1993, he said.
KinderCare, which is traded on the over-the-counter market, was unchanged Tuesday at approximately 47 cents.
KinderCare went into debt in the mid-1980s when it used financing arranged by Drexel Burnham Lambert Inc. to buy retail clothing and shoe chains, Western Reserve Life Assurance Company of Ohio and American Savings and Loan of Florida.
The company sold off its day-care division to a new company, KinderCare Learning Centers, and renamed what was left Enstar Group Inc.