View all newsletters
Receive our newsletter - data, insights and analysis delivered to you
  1. Technology
January 22, 1989


By CBR Staff Writer

In its initial filing for protection under Chapter XI of the US Bankruptcy Code, lessor Continental Information Systems claims to have assets of $1,860m and liabilities of $1,810m. The Syracuse, New York, company also says that the bulk of its obligations are secured by assets. A French bank is the largest unsecured lender listed in CIS’ bankruptcy petition, which is technically composed of 11 separate filings due to the complex legal structure of the company. One of the key battles shaping up is that between CIS’ largest lender and the lessor’s estate (as an economic entity in bankruptcy is called, even though company’s often have miraculous rebirths from bankruptcy proceedings). Prudential Insurance, which had advanced $110m to help CIS complete the acquisition of lessor CMI, is expected to seek control of the acquired firm, which has never been fully consolidated into CIS. As part of its loan agreement with CIS, the stock of CMI Holdings had been pledged as collateral. CMI had a very large lease portfolio when it was bought by CIS, and is therefore worth a great deal to Prudential as well as its bankrupt parent. The peculiarities of bankruptcy law may make it difficult for Prudential to get its hands on CMI. The arguments over ownership of CMI will be comBpleted in short order. Both sides recognise that the value of the equipment could well diminish rapidly in the volatile used computer market. Nor will Judge Prudence B Abram delay any decisions that could substantially hurt the bankrupt lessor or its creditor. Most of CIS’s debt is specifically tied to either leased equipment or pledges made by lessees; about $1,100m of the $1,810m in liabilities was so classified by CIS in its court filings. Of the remaining debt, some $82.5m is unsecured, which means that its repayment will be given a lower priority than other loans but a higher priority than the equity invested by shareholders. The largest unsecured creditor is Banque de la Societe Financiere, of Paris, to which Continental is in hock for $20.5m. The other large listed creditors are all American, mostly large banks that loaned CIS funds via their branches in Syracuse. These lenders include Manufacturers Hanover Trust Co, owed $15m; Chase Lincoln First bank, owed $15m; Norstar Bank of Upstate New York, owed $10m; First American Bank of New York; owed $5m; First Source Bank (of South Bend, Indiana), owed $5m; Key Bank of Central New York, owed $3m; Merchants National Bank & Trust Co, owed $2.5m; investment bankers Dean Witter Reynolds, owed $1.25m; Connecticut National Bank (of Hartford), owed $1m; Niagara Mohawk Power Corp. (the local electric utility, which was engaged in numerous business dealings with CIS), $656,000; New York Life Insurance, owed $641,000; Monarch Systems Group (of Springfield, Massachusetts), owed $535,000; TRW Inc (the conglomerate with offices in Orange, California, that is engaged in the refurbishing and service of computers), owed $493,000; Data Hardware Inc, (a computer refurbisher based in Bloomington, Minnesota), owed $475,000; Philadelphia Savings Fund (a Pennsylvania bank), owed $472,000; CCH Computax, (a financial services company in Los Angeles), $463,000; Corning Glass Works, owed $262,000; and Citibank, owed $236,000. Turmoil Further details of CIS’s financial condition are due to be made public within a few days. The company was supposed to have filed a quarterly report, called a form 10Q, with the US Securities and Exchange Commission on January 15. It did not, and was initially granted a five days’ extension. When CIS completes its assessment of the most recent fiscal quarter, which ended November 30, it may amend its bankruptcy filings to reflect any adjustment made necessary by its accounting process. CIS reported losses of $10.3m for the first six months of its fiscal year, which ends on February 28.

Efforts by CIS to reduce its expenditures, such as layoffs, are expected soon, but so far the company has said it hopes to miniBmise the turmoil necessitated by its bankruptcy filing. Too much depends on an initial truce in its

dispute with Prudential for CIS to move abruptly, but neither can it procrastinate. Thus, most observers believe the first signals of the troubled lessors’ new direction will become apparent within a month. Hesh Wiener

Copyright (c) 1989 Technology New of America Co Inc

Content from our partners
Rethinking cloud: challenging assumptions, learning lessons
DTX Manchester welcomes leading tech talent from across the region and beyond
The hidden complexities of deploying AI in your business

Websites in our network
Select and enter your corporate email address Tech Monitor's research, insight and analysis examines the frontiers of digital transformation to help tech leaders navigate the future. Our Changelog newsletter delivers our best work to your inbox every week.
  • CIO
  • CTO
  • CISO
  • CSO
  • CFO
  • CDO
  • CEO
  • Architect Founder
  • MD
  • Director
  • Manager
  • Other
Visit our privacy policy for more information about our services, how Progressive Media Investments may use, process and share your personal data, including information on your rights in respect of your personal data and how you can unsubscribe from future marketing communications. Our services are intended for corporate subscribers and you warrant that the email address submitted is your corporate email address.