International Harvester Co., teetering on the edge of bankruptcy, narrowly avoided it yesterday by reaching agreement with Deere & Co. to put up Harvester property as security while IH appeals a $28.5 million judgment against it won by Deere earlier this month.
In an addendum to the prospectus issued to support its financial bailout, Harvester disclosed Thursday that it could be forced to file for protection from its creditors under Chapter 11 of the federal bankruptcy code if it were not able to come to some sort of agreement with Deere. IH said it could not afford to pay the judgment or post a bond pending the appeal of the suit, which involved patent infringement.
Under an agreement in principle reached yesterday and expected to be made final on Monday, Harvester will give to Deere as security its proving grounds in Phoenix, which IH values at $30 million. In return, Deere agreed to drop liens that it filed against IH properties in Illinois to ensure that it would receive compensation for damages in the suit.
In anticipation of the agreement being final, Deere agreed to drop liens against Harvester's construction-equipment plants in Illinois, allowing Harvester to go through with a planned sale of the properties to Dresser Industries on Monday that will provide IH with $100 million in badly needed cash.
"Our purpose in this was to protect our stockholders and not to cause Harvester problems," said a spokesman for Deere, which is Harvester's chief competitor in the market for farm equipment.
The Deere situation was not mentioned by Harvester officials at a special shareholders meeting Thursday to approve portions of the refinancing plan, although Harvester Chairman Louis W. Menk did warn shareholders at the meeting that the company could be forced to file for bankruptcy protection even with the refinancing agreement.
IH is appealing the size of the award in the suit, in which it was found guilty of infringing on a Deere patent. In such a case, it usually would post bond pending the appeal, if it could not get a payment delay.