Advertisement
YOU ARE HERE: LAT HomeCollections

Conversion Industries Takes Loan From Affiliate CVD to Shift Debts

October 27, 1994|TOM PETRUNO | TIMES STAFF WRITER

Conversion Industries of Pasadena, whose assets have collapsed over the last 12 months, said Wednesday it has borrowed $3.1 million from one of its affiliates.

The loan, the latest of several controversial transactions between Conversion and its subsidiaries, was made by CVD Financial, also of Pasadena. It allowed Conversion to repay $2.2 million in bank and margin debt, the firm said.

Conversion, a "merchant bank" whose business is investing in and spinning off other businesses, created CVD Financial in August, 1993, mainly to lend money to other Conversion affiliates.

Since last fall, Conversion's investment portfolio has plummeted in value and the company has had to scramble for capital. And, in a rare move, the American Stock Exchange on Oct. 11 said it would delist shares of Conversion and its Beta Well Service affiliate, citing unspecified issues of disclosure.

Meanwhile, Conversion and its affiliates have become targets of an informal Securities and Exchange Commission probe.

Under the loan agreement with CVD Financial, Conversion will pay the prime rate (now 7.75%) plus 7 points, but won't owe interest for six months. Conversion also surrendered its 35% stake in CVD Financial and gave CVD Financial a first lien on all Conversion assets.

But the relationship between the two firms is further complicated by guarantees Conversion previously issued to CVD Financial for loans it made to certain other Conversion affiliates. CVD Financial said it eliminated $2.3 million of the $8 million in Conversion guarantees as part of the loan pact.

Roy McCann, president of CVD Financial, said the loan's terms were reviewed by a special committee of CVD directors. He said the loan and the stock give-back offered "a way to keep Conversion as a solid company" while also allowing CVD to cut Conversion's direct ownership tie to CVD and thus function more independently.

However, McCann said he could not comment on whether Conversion may need additional capital to shore up its investment portfolio. Conversion officials did not return a phone call.

Trading in CVD Financial shares has been halted on the Amex since Oct. 13, at the firm's request. McCann said trading would resume today. CVD was last quoted at $1.

Trading in Conversion and Beta remains suspended as the Amex pursues delisting of the stocks.

Advertisement
Los Angeles Times Articles
|
|
|