Real estate developer Dominic F. Antonelli Jr. has become the largest stockholder of The Washington Corp. by purchasing about 22 percent of the company's stock and helping to refinance $4 million of its debts.
Antonelli, previously a minor stockholder, was named to Washington Corp.'s board as part of the refinancing deal, the company announced yesterday.
Chairman William N. Demas said the arrangement with Antonelli will free the company from restrictions on its opertions imposed by five banks to whom it owed $3.9 million.
Antonelli purchased 468,516 shares of Washington Corp. preferred stock from the banks at $1.50 a share, a total just under $700,000. The banks had acquired the stock in payment of debts of the real estate investment firm after it ran into trouble several years ago.
In addition, Antonelli agreed to guarantee a new $4 million loan from Riggs National Bank that was used to pay off loans from the other lenders.
"The big advantage to the company is that Antonelli gets the stock from the creditor banks and it frees us from the onerous restrictions of the bank loan agreement," Demas said.
The loan restrictions prohibited the company from paying dividends to stockholders or acquiring new property, and included liens on all its holdings, Demas added.
Purchase of the 468,516 shares of preferred stock, which can be converted into 485,719 common shares, makes Antonelli Washington Corp.'s largest holder. About 325,000 shares are owned by Berkeley Bio-Medical, a California firm, and Demas holds 269,000 shares.
Demas and Antonelli together control 35 percent of the corporation. As part of the arrangement that brought in Antonelli, he and Demas signed a five-year pledge not to increase their holdings to more than 45 percent and not to initiate any bid for control of the company or sell their shares to outsiders.
That agreement gives the company first claim on Antonelli's shares, should he decide he wants to sell, and gives the firm the right to repurchase his shares for $3 each after the Riggs loan is repaid.
Demas called the agreement with Antonelli "a very big step" that will allow the company to expand its operations. Established as a tax-exempt real estate investment trust, Washington Corp. was forced to reorganize because of its financial problems.
The previous loan agreement required that virtually all the company's earnings be used to repay debts. Now it will be able to use cash to buy new property for development, Demas said.
Washington Corp. owns some undeveloped land and part of three developments in the D.C. area, including the 149-unit Carlton apartment complex, under construction on Willard Avenue in Chevy Chase.