IN YESTERDAY'S BUSINESS SECTION, THE HEADLINE ON AN ARTICLE ABOUT CRIIMI MAE INC. WAS INCORRECT. THE COMPANY HAS NOT YET FILED WITH THE COURT ITS PROPOSED PLAN FOR EMERGING FROM BANKCRUPTCY PROTECTION. (PUBLISHED 09/11/99)
Criimi Mae Inc. of Rockville yesterday announced a plan to emerge from Chapter 11 bankruptcy protection with an injection of capital from Apollo Real Estate Advisors, a partnership run by New York investor Leon Black.
Criimi Mae, a company that invested in the riskiest commercial real estate securities, filed for bankruptcy court protection in October amid the market confusion that followed the Russian debt crisis and the near-collapse of hedge fund Long-Term Capital Management L.P. Criimi Mae's problems helped bring the commercial mortgage-securitization business to a temporary standstill.
The reorganization plan still requires the approval of the bankruptcy court.
The company announced late yesterday that it has entered into an agreement with Apollo under which the investment partnership will buy $50 million to $61 million in new Criimi Mae convertible preferred stock as part of an approximately $910 million financing. Black and his Apollo funds are known for buying distressed stocks, properties and companies.
The rest of the money for the reorganization will come from two sources. About $435 million will be debt financing, "some of which would come from existing debtholders," according to the company's announcement. Most of the remaining $425 million would come from the sale of part of the company's portfolio of commercial mortgage-backed securities (CMBS). Apollo will have the right to purchase these securities.
As much as $11 million of that $425 million could come from an offering in which existing common stockholders would be able to purchase new preferred stock.
"Apollo's investment with us provides additional capital while the plan to sell CMBS slims down Criimi Mae," Criimi Chairman William B. Dockser said in a statement.
While it has been under Chapter 11 bankruptcy court protection, Criimi Mae has continued to operate its mortgage service business, although it suspended its investments in new mortgage securities.
As in most bankruptcy proceedings, common stockholders have seen their investment in Criimi battered over the last year. Stock that was worth about $7 a share just before the bankruptcy filing has since averaged less than $3 a share.
Yesterday, as a deadline for Criimi to make a court filing approached, the firm's stock was among the biggest percentage gainers on the New York Stock Exchange even though the plan was not announced until after trading closed. The shares closed at $2.62 1/2, up 37 1/2 cents.
Apollo principal Richard Mack said, "We like the fundamentals of the assets and we think that Criimi Mae's problems were due to a mismatch of the terms of the assets with those of the liabilities."