Interco

2 February 2017

First, any suggestion in the story that our fee arrangement with Interco was something we “evidently wanted . . . kept secret” is absurd and unfair. All tender-offer-related fee arrangements must be disclosed pursuant to the U. S.

securities laws. In fact, our arrangements with Interco were promptly and publicly disclosed. Second, the board of Interco had already publicly committed itself to pursuing a restructuring and to launching the recapitalization plan prior to the date that our fee arrangement was agreed on with the company. Neither we nor the board viewed our fee arrangement as contingent in practical effect.Furthermore, unlike our recapitalizations or reorganizations of this size that involve hundreds of millions of dollars of banking fees, this transaction was designed to avoid large bridge financing and junk-bond underwriting fees. In this case, securities were issued directly to shareholders thereby passing savings on fees through to the shareholders. In fact, a relatively small fee was payable upon completion of the recapitalization: $3.

Interco Essay Example

7 million. The Journal story also implied that the recapitalization plan was unnecessary and pursued in a hasty manner after the hostile bidder dropped its offer.This has no basis in fact. There were extensive meetings with the operating units to review their plans. The board—which had been briefed extensively on the plan during numerous long meetings over several months—had already publicly announced its intention to pursue the recapitalization. The markets relied on these public statements. Interco had already begun the recapitalization process and had paid significant commercial bank commitment fees to finance the senior debt portion of the transaction.

The company remained under pressure from the former raider, which was still its largest shareholder, and from arbitragers, which held a large portion of its stock. If Interco had decided not to pursue the recapitalization, it would have been vulnerable to a takeover by the former raider or another party, possible at a much lower price. The recapitalization was a good-faith effort by the board of directors to deliver value to shareholders, to avoid potentially massive shareholder litigation, and to put an end to a hostiletakeover attempt.The projections relied on in the recapitalization were prepared by Interco’s operating management—not by us. We do not run companies: Our clients do. These projections were accepted as reasonable by an independent appraisal firm that opined upon the viability of the recapitalization, and by a syndicate of highly sophisticated commercial banks that lent more than $1 billion to the transaction. Indeed, the company’s next attempt at projecting its performance, done during the reorganization period with a new set of sophisticated advisers and with a very long period of 14 reparation, turned out to be materially off target again.

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