WASHINGTON -- The new chief executives of Infotechnology Inc., which owns 47 percent of Financial News Network, said Wednesday they plan to sell the cable business news network and other major holdings.
Alan Hirschfield and Allan Tessler also said they have hired Wertheim Schroder & Co., an investment banking firm that deals in media properties, 'to effect the most valuable and timely transactions for both the creditors and the shareholders of FNN and Infotech.'
Hirschfield took a leave of absence from Wertheim Schroder, where he was a managing director, to work as an interim CEO at Infotech and FNN.
'Our primary objective is to maintain the substantial franchise value of FNN,' they said in a statement. 'To do this requires making the necessary overhead reductions that enable the great majority of our employees to remain on the job.'
Infotechnology also owns United Press International, which has been put up for sale. The news agency said Friday it had been approached by six potential buyers, including several 'blue-chip companies,' and imposed a 35 percent pay cut on non-union employees for 90 days to keep UPI operating until a sale could be negotiated.
On Monday, UPI's union employees were told that unless they voted to accept a 35 percent pay cut for the 90-day period, the 83-year-old wire service could be forced to shut down as early as Nov. 17, a day after the ballots are counted.
'As a result of recent contract cancellations and other ongoing factors, UPI currently has a substantial negative monthly cash flow,' Hirschfield and Tessler said. 'It has been necessary to make some painful decisions regarding layoffs and reduced compensation to continuing employees in order for UPI to remain in business until suitable purchasers are identified.'
Hirschfield and Tessler, who replaced Dr. Earl Brian as CEO of Infotech, said 'serious interest' has been expressed by several parties in the purchase of UPI 'and/or some of its lines of business.'
In an interview from his New York office, Hirschfeld said, 'It's a priority from the human side' to keep UPI alive 'but clearly in terms of relative value, our first priority is maintenance of the FNN franchise.'
Hirschfeld added, 'We're hopeful we're not going to have to shut down' UPI.
He also said a sale of FNN or UPI is contingent on an audit of Infotech's books that is expected to be completed Nov. 21.
The crisis at Infotech was triggered by a dispute over a charge that outside auditors said FNN should take against its fiscal fourth-quarter earnings for start-up costs of a new professional investors service called FNN:PRO.
FNN said it could be placed in default on bank loans if forced to report a substantial fourth-quarter loss because of the FNN:PRO charge.
In mid-October Infotech and FNN replaced Deloitte & Touche, the outside auditors, with Coopers & Lybrand to perform the audit of the companies' financial results.NEWLN: more
On Oct. 24, FNN said it had outstanding debts of about $49.5 million in bank loans and about $88 million in equipment lease obligations. Infotech owes about $20.7 million on bank loans. As a result, Infotech and FNN said their operating cash flows were insufficient to meet operating expenses or debts.
'Discussions with our banks are ongoing,' Hirschfield and Tessler said. 'We hope to obtain a 90-day moratorium on interest and principal payments and on any defaults.
'Furthermore, we have met with representatives of substantially all of the lessors of equipment to the companies and are currently in negotiations with them to obtain a 90-day moratorium on all leasing payments. There there can be no assurance that we will obtain these moratoriums.'
FNN stock gained 75 cents to $3.25 a share at Wednesday on the over- the-counter market. Infotech stock rose 37.5 cents to $1.375 a share.
'Wertheim has confirmed for us that FNN remains a very valuable franchise and is one of the top 10 leading cable programming networks in the country,' Hirschfield and Tessler said. 'To date, indications of interest in buying FNN have been received from many of the major national and international media companies.
'Even during this difficult period, FNN continues to increase its subscriber base and gross revenues,' they said. 'More than 80 percent of its subscribers are under long-term contracts at increasing subscriber rates.'
Hirschfield and Tessler said many inquiries have been received about FNN's subsidiaries that deliver stock and other data to investors.
FNN and the other entities hope to 'receive acceptable offers and to conclude negotiations of the contracts for such sales by year end,' Hirschfield and Tessler said, but added there are no assurances any sales will be completed.
The executives also said Infotech and FNN are cooperating with an investigation by the Securities and Exchange Commission but noted they 'are distressed by many of the unfounded rumors surrounding current events at the companies.'
The boards of both Infotech and FNN have taken very seriously allegations of fraud and misappropriation of funds at the companies and the outside auditors are thoroughly investigating these assertions, they said.
'To date, inquiries by a special committee of the board of FNN, assisted by auditors and legal counsel, have found only one incident in which company funds were improperly paid and not properly identified on the books of the company,' the executives said.
'That incident, previously disclosed by FNN, involved the receipt by FNN's former chief financial officer of compensation payments, which were not properly authorized, in the approximate amount of $795,000.'
C. Stephen Bolen, the chief financial officer of FNN, was fired Oct. 12. He had been on leave since FNN began questioning certain payments to him.
The new chief executives of Infotechnology Inc., which owns 47 percent of Financial News Network, said Wednesday they plan to sell the cable business news network and other major holdings.
Alan Hirschfield and Allan Tessler also said they have retained the services of Wertheim Schroder & Co., an investment banking firm that deals in media properties, 'to effect the most valuable and timely transactions for both the creditors and the shareholders of FNN and Infotech.'
Hirschfield took a leave of absence from Wertheim Schroder, where he was a managing director, to work as an interim CEO at Infotech and FNN.
'Our primary objective is to maintain the substantial franchise value of FNN,' they said in a statement. 'To do this requires making the necessary overhead reductions that enable the great majority of our employees to remain on the job.'
Infotechnology also owns United Press International, which has been put up for sale.
The news agency said Friday it had been approached by six potential suitors, including several 'blue-chip companies,' and imposed a 35 percent pay cut on non-union employees for 90 days to keep UPI operating until a sale could be negotiated.
On Monday, UPI's unionized employees were told that unless they voted to accept a 35 percent pay cut for the 90-day period, the 83-year-old wire service could be forced to shut down as early as Nov. 17, a day after the ballots are counted.
'As a result of recent contract cancellations and other ongoing factors, UPI currently has a substantial negative monthly cash flow,' Hirschfield and Tessler said. 'It has been necessary to make some painful decisions regarding layoffs and reduced compensation to continuing employees in order for UPI to remain in business until suitable purchasers are identified.'
Hirschfield and Tessler, who replaced Dr. Earl Brian as CEO of Infotech, said 'serious interest' has been expressed by several parties in the purchase of UPI 'and/or some of its lines of business.'
In an interview from his New York office, Hirschfeld said, 'It's a priority from the human side' to keep UPI alive 'but clearly in terms of relative value our first priority is maintenance of the FNN franchise.'
Hirschfeld added, 'We're hopeful we're not going to have to shut down' UPI.
He also said a sale of FNN or UPI is contingent on an audit of Infotech's books that is expected to be completed Nov. 21.
The crisis at Infotech was triggered by a dispute over a charge that outside auditors said FNN should take against its fiscal fourth-quarter earnings for start-up costs of a new professional investors service called FNN:PRO.
FNN said it could be placed in default on bank loans if forced to report a substantial fourth-quarter loss because of the FNN:PRO charge.
In mid-October Infotech and FNN replaced Deloitte & Touche, the outside auditors, with Coopers & Lybrand to perform the audit of the companies' financial results.
On Oct. 24, FNN said it had outstanding debts of about $49.5 million in bank loans and approximately $88 million in equipment lease obligations. Infotech owes about $20.7 million on bank loans.
As a result, Infotech and FNN said their operating cash flows were insufficient to meet operating expenses or debts.
'Discussions with our banks are ongoing,' Hirschfield and Tessler said. 'We hope to obtain a 90-day moratorium on interest and principal payments and on any defaults.
'Furthermore, we have met with representatives of substantially all of the lessors of equipment to the companies and are currently in negotiations with them to obtain a 90-day moratorium on all leasing payments,' they said.
But the executives also cautioned: 'There there can be no assurance that we will obtain these moratoriums.'
FNN stock gained 75 cents to $3.25 a share at Wednesday on the over- the-counter market. Infotech stock rose 37.5 cents to $1.375 a share.
'Wertheim has confirmed for us that FNN remains a very valuable franchise and is one of the top 10 leading cable programming networks in the country,' Hirschfield and Tessler said. 'To date, indications of interest in buying FNN have been received from many of the major national and international media companies.
'Even during this difficult period, FNN continues to increase its subscriber base and gross revenues,' they said. 'More than 80 percent of its subscribers are under long-term contracts at increasing subscriber rates.'
In addition, Hirschfield and Tessler said many inquiries have been received about FNN's subsidiaries that deliver stock and other data to investors.
FNN and the other entities hope to 'receive acceptable offers and to conclude negotiations of the contracts for such sales by year end,' Hirschfield and Tessler said, but added there are no assurances any sales will be completed.NEWLN: more
The executives also said Infotech and FNN are cooperating with an investigation by the Securities and Exchange Commission but noted they 'are distressed by many of the unfounded rumors surrounding current events at the companies.'
The boards of both Infotech and FNN have taken very seriously allegations of fraud and misappropriation of funds at the companies and the outside auditors are thoroughly investigating these assertions, they said.
'To date, inquiries by a special committee of the board of FNN, assisted by auditors and legal counsel, have found only one incident in which company funds were improperly paid and not properly identified on the books of the company,' the executives said.
'That incident, previously disclosed by FNN, involved the receipt by FNN's former chief financial officer of compensation payments, which were not properly authorized, in the approximate amount of $795,000.'
C. Stephen Bolen, the chief financial officer of FNN, was fired Oct. 12. He had been on leave since FNN began questioning certain payments to him.
