As reported (CI No 3,414), troubled Zenith Electronics Corp is indeed planning to file for Chapter 11 bankruptcy and reorganize itself as a subsidiary of major shareholder LG Electronics Inc. Under the plan announced last week, Zenith will become a wholly- owned subsidiary of LG, which bought a 55% stake in 1995 for $351m. LG will convert $200m of Zenith’s debt into LG common stock and take control of several manufacturing plants in Mexico. LG has also pledged an additional $60m in credit to support the restructuring plan. If the Securities and Exchange Commission approves the restructuring plan, Chapter 11 papers will be filed in the fall and, if all goes according to plan, Zenith will re- emerge from bankruptcy as part of LG by the end of the year. All of Zenith’s outstanding common shares will be canceled and the holders will receive no distribution. The New York Stock Exchange has already suspended the shares and begun de-listing procedures. The company also plans to outsource the manufacturing of more products and components and is looking for buyers and/or strategic alliances for several ongoing businesses. Additionally, Zenith is seeking an investor for its set-top box and cable modem business. Zenith insists that creditors, vendors and employees will continue to be paid throughout the reorganization. The fate of Zenith employees currently involved in manufacturing – there are about 9,000 in the US – is unclear, however. Zenith, which has been losing money at an alarming rate, recently posted a loss of nearly $300m for the last fiscal year (CI No 3,381). At that time, the Glenview Illinois company said it planned serious restructuring and that Chapter 11 was a distinct possibility.
