DALLAS -- Southmark Corp., once a $9 billion real estate-based financial company, Friday emerged from Chapter 11 bankruptcy under a plan allowing it to reorganize around its San Jacinto Savings Association and paying a fraction of about $2 billion in debts.
The reorganization plan was confirmed July 16 by U.S. Bankruptcy Court Judge Steven Felsenthal, a year after the company sought Chapter 11 protection. Prior to the bankruptcy filing, the company had lost about $1 billion and halted interest payments on much of its junk bonds.
Southmark said it had commenced distributions to its creditors and shareholders under the plan. The creditors would receive a few pennies to about 32 cents on the dollar -- an average of about 17 cents on the dollar.
Southmark said it also transferred $76 million in cash, secured notes and preferred and common stock of the new company to its creditors and shareholders.
Also under the plan, most of Southmark's assets other than San Jacinto Savings in Houston will be liquidated. The assets currently have a liquidation value of about $227 million. The proceeds will be used to redeem the new notes and preferred stock of the reorganized company.
Under an agreement with thrift regulators, Southmark transferred $100 million to recapitalize San Jacinto. The $100 million includes about $10 million in cash and cash equivalents.
Even with the recapitalization, the future of San Jacinto, which is currently insolvent, would remain cloudy.
As part of the plan, Arthur Weiss resigned as Southmark's chairman.
Glen Adams, who had held senior positions at Texas Industries Inc. and Electronics Data Systems Corp., was named to succeed Weiss. Adams will also be president.
Other members of the board resigned, except for two who agreed to stay on during the transition period. The new board will be made of those nominated by an unsecured creditors committee and elected by the new shareholders.
To ensure it has adequate working capital, Southmark also proposed to defer some $8 million of fees due the professionals who had worked in the bankruptcy proceedings. The fee and interest at 10 percent would be payable no later than April 15, 1991, and would be paid prior to any payments of interest or principal on the new notes, the company said.
