History of Milken-Hurwitz Relationship Part I | History of Milken-Hurwitz Relationship III
Begin Part II
These meetings in July put everything in place for the takeover. Obviously the buying of PLC shares preceded the commitments needed for the takeover suggesting that Hurwitz and Milken were in the lead.
Jul. 23 MXM Board meeting, 9:00 a.m. (Rosen). Maxxam board discuss possible acquisition and investment bankers (Drexel). Hurwitz informs the board that the company is exploring a “possible acquisition.” Hurwitz says values in PLC are in the timber.
Rosen calendar shows meeting with Quirk, Lynch, Reid.
Jul. 24 Farrenkoph calendar shows all day meeting with Drexel.
Rosen calendar shows meeting with Gallagher and Beaumont.
Jul. 26 Rosen and Kassan meet with ITC’s Begley, Jones. ITC hired to consult on a possible acquisition. Maxxam informed ITC of a preliminary interest in a timber industry acquisition.
Jul. 27 Gallagher & Beaumant send “Re: Timberland short fall indemnity” to Rosen from Lloyd’s, London. The timber put insured the purchases of the “zeros’”. In the event the Zeros came due, Maxxam not able to pay, issuer would pay and take acreage.
Jul. 29 Page 64, Cong. hearings, indicated Jefferies may have begun buying PL holdings.
Jul. 29 Farrenkopf meets with Drexel per his calendar. this could be related to the bond issuance by MCOH.
Jul. 29 Rosen calendar shows meeting with Gallagher.
Jul. 29 and 30 Maxxam using “Centennial” buys 28,800 shares PLC through Herzog, Hune, Gedult
Jul. 30 Drexel retains Western Timber Services, Inc. to value PL holdings
Jul. 31 Drexel calendar shows meeting with Maxxam
Aug. Hurwitz and FDC owned 32% of MCO Holding’s common stock and 65% of its voting power. MCOH had 37.3% interest in Maxxam Group, Inc.
Aug. – IFB obsessed with the financing which was eventually to occur in Mar.1986
On August 1,1985, Drexel sold $35 million in debt 14-1/4% SSN’s due (1992) for MCOH, Mani Hani involved as guarantor, realized $33,587,520; 3.75% to Drexel. OTS: $30.9mm, 12/31/89 as Maxxam. This offering approved at $25 million. FEC held $29.3 million in this issue.
Aug. 01 Winterthur Swiss Insurance Co. bought 10,000 shares PLC on this date and on Sept. 23, 13,200 shares more from Salomon Bros.
Aug. 01 Maxxam buys 59,300 shares of PL through Herzog, Hune, Gedult
Aug. 02 Federated Development Co. applies for new account with Jefferies & Co.
Aug. 02 Rosen calendar shows meeting with “Lynch/Quirk here”. Drexel calendar meet 350 Park Ave. Hurwitz, Drexel, & Lynch begin discussing takeover of PL.
August 5 HSR Act
On June 27, 1985, Hurwitz claimed that the value in PL was in its timber.
On July 10, 1985, Drexel presented a draft of an engagement letter to Maxxam. Discussions involved both Hurwitz and Milken.
On July 23, 1985, the Maxxam’s board heard Hurwitz discuss a “possible acquisition”.
On July 26, 1985, Irving Trust was hired by Maxxam to consult on PL takeover planning.
On August 5, 1985, Maxxam made its last PL stock purchase until late September. This last purchase was through Drexel. Maxxam stopped buying PL stock as Maxxam approached the $15 million H-S-R limit. Kramer, Levin (for Maxxam) called Morgan, Lewis, Bockius (for Jefferies) and received advice that a “put-call option” was allowable for the purchase of PL shares from Jefferies. Notes show discussions of treating Jefferies not as an agent but to treat Jefferies differently in reporting PL holdings so as to avoid H-S-R and 13D filings.
Aug. 05 Maxxam bought 49,300 shares of PLC through Drexel. Maxxam approached $15 million H-S-R limit and stopped buying (455,300 shares) PLC. 367,200 through Drexel, 88,100 through Hertzog, et al.
Aug. 05 Kramer, Levin (for Maxxam) attorney calls Morgan, Lewis & Bockius (for Jefferies) and gets advice that “a put-call option” is OK for PLC shares. Notes show advice includes (pp302-3 Cong. hearings) discussions of treating Jefferies not as an “agent” but treat them differently (as securities dealer?) in 13(D) & exercise after expiration of H.S.R. (but see Sep. 26-27)* Also discussion re: exceeding H-S-R. “so far no probs w/FTC”. Time sheets indicate calls from Heller to Hurwitz, Schlossberg, and Hartigan.
Drexel, also in August, agreed to raise funds for the PL takeover.
Maxxam requested ITC’s “facilities” in financing the PL takeover. Maxxam’s plan included Drexel’s underwriting of bond issuances.
Aug. 05 Rosen calendar Irving Trust lunch
Aug. 06 Lynch’s(?) calendar shows a meeting with Bilger.
Aug. 07 Irving sets up account for Maxxam, signed by Roger Jones.
Aug. 12 Farrenkopf calendar shows meeting with Drexel. Lynch, Reid, Ray, Levine discuss 13D position/Maxxam in New York
Aug. 14 Farrenkopf calendar shows meeting with Drexel “Conf DB re SPI/Maxxam”.
Drexel retains Oregon firm to conduct timber cruise of PL holdings see July, justify
Aug. 16 Gallagher & Beaumant send amended “Re: Proposed timberland short fall indemnity” to [Rosen]*
Aug 16 Maxxam letter from Kassan to ITC’s Jones with latest 10-Q and press release explaining their quarter proceeds.
Aug. 19 Drexel calendar shows meeting with Maxxam. This might be the L.A. meeting of Drexel and Maxxam where Quirk handed out a handwritten memo re: BDFT. Could this be the meeeting where supposedly in Aug.-late Drexel “only possible banker for PLC purchase.” Aug.-late Drexel agree to raise funds for Maxxam attack on PLC or Were these references to the Sept 10 board meeting. PB65B, DB5051199 may be handwritten notes of this mtg. but it reports two foresters overflights and their estimates. These may be notes from the era of 9/10 to 9/12.
Aug. 19 Maxxam Associates opens an account at Jefferies & Co.
Aug. 22 Drexel calendar shows meeting with Gallagher and Beaumont.
Aug. 23 Rosen calendar – Irving Trust group Irving meeting report with Maxxam. Maxxam begins discussions with Irving Trust to finance takeover of unnamed company. Maxxam requests ITC “facilities”. Financing to come from Irving with $175mm of its own, $125 mm borrowed from banks and approx. $400mm from Drexel. Lawyers for Irving are Drexel associates Winthrop and Stimson. An ITC graph showing financing stages. This date Maxxam says no other banker is being considered?
Aug. 23 Maxxam did not file within 15 days, or stop trading for 15 days, pursuant to H-R-S.
Aug. 29 Maxxam suspends discussion with Gallagher. Drexel calendar shows what might be a cancelled meeting with Gallagher and Beaumont.
Late Summer “Not easy to escape the Drexel presence”
The problem (of fiduciary responsibility inside trading and disclosure) compounds when Ivan Boesky, the country’s most famous arbitrager, is involved. Boesky (by late 1986 will be a major issuer of paper more than $1 billion thru Drexel), is an arbitrager who wants to find which companies Drexel is targeting for takeovers, and a powerful market force whose support is vital when Drexel clients are involved in a hostile takeover. (Forbes 8/25/86)
However see tabulation of Boesky inside trades with Drexel and others.
Aug 30 Irving memo re Pacific Lumber power plant.
Sep. Handwritten note – mentions Rosen
Sep. Maxxam buys $475 million Fanny Mae pool
Sep. 03 Maxxam discloses to Irving the name of company (Pacific Lumber) that they plan to acquire for first time. Maxxam gives this date as beginning of Maxxam-ITC talks. But see June 10 [Maxxam reveals strategy. Maxxam/ITC discuss financing structure.]
Maxxam has cash & short term investments of $263,185,000 with
Current Assets : $ 479,822,000
Liabilities : $ 226,217,000
Working Capital: $ 253,665,000
Sep. 03 Rothschild bank agent in Switzerland buys 5 thousand shares PLC
Herbert Gordon, a neighbor of RLR, buys 9,000 shares PLC this date and 800 more on Sep. 04. Herbert Gordon’s family (allegedly on tip from Robert Rosen) bought 18,400 shares of PLC in September.
Gordon and RLR both buy Hoover Universal, Inc. prior to announcement of takeover of HVU by Johnson Controls, Inc. TSG also bought HVU on the same day as RLR and Kassan.
Sep. 04 Andriba buys 3,000 shares PLC
Kassan sent Centennial public material re target to Fung at ITC. Syndicate Candidates list (8 banks). Draft of Maxxam/Centennial debentures/terms.
Sep. 05 Farrenkopf calendar shows meeting with Drexel. Rosen calendar shows meeting “Drexel -55 Broad”. “CH appt” Reid, Lynch at Drexel. Hurwitz meets with Drexel charges expenses to “Federated Reins Co.” Note that 2/86 ITC memo re Maxxam lists Hurwitz as Chair and CEO of FRC at that time.
Irving memo re PL power plant proposal “bid aggressively”; Watt to Tenicki
Sep. 06 Drexel calendar shows meeting with consulting forester. Kramer Levin calendar agrees.
Sep. 09-12 Maxxam-ITC meet daily. On the 9th there is an Irving meeting report with Maxxam “Assume $40 PS” Maxxam committed to PL tender offer.
Sep. 09 Rosen – Drexel – 55 Broad
“CEH appt” at Fred Joseph
Maxxam board mtg. Hurwitz and Rosen discuss the acquisition [with no alternative to the “tender for all shares.” No alternative to Drexel/ITC financing]
Sep. 10 Maxxam (Kassan) letter to Newcomb (Irving) with 12 copies of Maxxam’s 10-K’s, 10-Q’s, etc. and Centennial’s 10-K, 10-Q and Proxy
Maxxam (Kassan) letter to Fung (Irving) enclosing “a copy of a prelim. draft of the two financing vehicles that Drexel is considering assuming we contribute $150 million as equity”. Irving’s draft “Maxxam/Newco/target” by Fung for $130 million participation in a $400 million credit. Sets opening bid at $35 and the maximum at $40/share tender. Shows reliance on Drexel placing over $400 million in subordinated debt. Mentions “highly confident” letter. Includes an in-depth analysis of PL, and scenarios for repayment of bank debt based on liquidation of assets and pension fund, and increased lumber production and concludes (p.13) “Hence, using this estimate, the company’s net worth is understated by over $1 billion”; and (p.14) “Since the timber assets is undervalued by over $1 billion, the $705 million required write up in assets is not considered excessive.” Same memo, p.14 has handwritten note next to the $1 billion undervaluation…” Change in tax law not a major threat’. Memo mentions PL’s conservative management.
(p.2 only) Irving memo re Maxxam Group – on the board makeup of target plus 2/3 vote to replace board members and retain 1 or 2 to help satisfy fair price provisions” (see 9/20/85 memo, this is probably mis-dated on p.2).
On September 10, 1985, Jefferies’ staff became concerned about how PL stock was being held on Jefferies books. Hand written tabulations indicate that Jefferies tabulated their holdings on this date for the first time since beginning their purchases for Hurwitz. This indicates that someone at Maxxam (Hurwitz or Rosen) called and asked for an up-to-date accounting on or shortly before this date, perhaps as a follow up to the recent meeting with Drexel staff for the purpose of preparing the request to the Drexel Underwriting Assistance Committee (UAC) regarding Drexel financing of the takeover bonds. UAC was a committee of high level Drexel executives including Fred Joseph, Leon Black, Herb Bachelor and others.
First Memo: “Max – 9/10/85 – per Boyd Jeff. Above stock `will be sold at cost or for a loss, because Iowe money to an individual’ No contract – told Ron A – Annual Audit due – I do not like carrying this without a contract. He said he will try and find out more about it. I told Boyd we should have one.
810 – Pacific Lumber – per Boyd – as soon as `I get enough stock – contract will be written.’ told Ron same thing – Both said to carry at cost” (initials)
(Note: “Max” may be Maxxam, or Maxine Syrjamaki)
re I owe money, see article about Jefferies involvement in a mysterious money transfer.
“810 – 298,800 Pacific Lumber Dr 8,493,023.38. Mark @ cost-per verbal conversation this date with Boyd Jefferies – Called Ron Alghini & told him same. Told him were due for our annual examine (NASD) & would like contract for same. Said he would find out whats going on
Booked – Aug – PL-810 loss <53,876.67> Leave”
Sep. 10 A Jefferies spread sheet show the first set of totals for the number of shares of PL Jefferies held as of “Close 9/10” at 303,800 = $8,691,900.01 After that date, the totals are made daily.
Sep. 11 Rosen calendar shows meeting with Drexel.
Sep. 11 Jefferies “Account Request Printout” form shows the 810 Acct. No., then a note “Pacific Lumber. Per verbal conv. with Boyd Jeff & R.A. 9/10/85. cc: Syrjamaki” (Maxine Syrjamaki was probably the director of accounting at Jefferies & Co.) or was this Harmon?
Sep 11 Irving “Credit Approval Sheet” – Maxxam/Newco. Summarizes the above $130 million/$400 million credit terms. After merger, that facility will be replaced by $81.25 million/$250 million revolting credit with ITC as agent, to expire 1-year from merger date.
Irving memo, Newcomb to K.J. Abere, SVP, re primary bank candidates for participation (NatWest/Montreal/CIBC/ Nova Scotia\Westpac/ Toronto/Rainier/ First City). Information package will include commitment letter and “a satisfactory confidentiality letter”.
Sep 12 Price Waterhouse letter to Affinito re a Sec. 338 election, with charts. Mentions ITC in “recapture” section assumes $30 million pension surplus taken back.
On September 12,in a meeting held at Drexel/NY, Lynch, Reid, Kay, Levine, Rosen, Hurwitz and Farrenkoph discussed buying more than a 13(D) position. They decided to stay at less than 5%.
A memo to Drexel’s Underwriting Advisory Committee, dated September 12 indicates the amount of shares under Maxxam’s control at 750,000, accurately documenting the number of shares of PL held by Jefferies (303,800) on the 10th and described them as belonging to Maxxam “via option”. Maxxam held 455,300 shares directly. It was based upon this document that Drexel approved the financing for the PL takeover.
The authors of the memo are listed as Bilger, Reid, Lynch, Sven Wehrwein, Marc Rowan and Quirk. The memo assumed a Tender price of $35 and claims that Maxxam will proceed with the Tender Offer after accumulating as much as 10% of the outstanding stock of PL.
(Can we surmise from this that Drexel or Maxxam (Rosen or Hurwitz?) called Jefferies around 9/10 looking for a total and this resulted in the sum mentioned in the above handwritten notes?)
Sep. 16-26 Jefferies & Co. purchase (through Josepththal & Co.) 146,700 shares of PL in 10 transactions for prices between 28-1/4 -29
Sep. 16 Farrenkopf calendar shows meeting with Drexel.
Sep 16 Irving Credit Approval Sheet re $130 million participation in $400 million and $81.25 million participation in $250 million (The copy to Congress has more handwritten info than copy we already had.) Mentions $40/share.
Sep 16 ITC letter to Vince Garner with power plant proposal for $10 million, faxed on 9/18/85
Sep. 17 “CEH conference call” Lynch, Bilger for negotiation of terms?
Sep 17 Draft letter of agreement with fees. “The name of the target co is…” Markup shows to and from Maxxam and Irving reversed.
Winthrop Stimson letter to Farrenkopf (Maxxam) “re: Maxxam-Irving” enclosing draft of mandate and commitment letters.
Sep. 18 Letter from Winthrop Stimson to Farrenkopf – draft mandate
Sep. 18 Farrenkopf calendar shows meeting with Drexel, Rosen calendar shows meeting at 55 Broad. Kramer-Levin calendar agrees.
Sep. 18 Meeting of Drexel’s Underwriting Assistance Committee.
Drexel’s Project Centennial Underwriting Assistance Committee Memorandum.” Cover shows 9/18/85 but Drexel memo inside is 9/12/85. This is the document which shows Hurwitz controlling 750,000 shares on 9/12/85.
Sep 19 Drexel’s Centennial Work Group list with one page showing Irving business cards for Jones/Newcomb/Fong.
Sep. 19 Rosen signs new account form for Maxxam Group with Jefferies.
Sep. 19 Elam calls Hurwitz near this date
Sep. 19 Northview buys shares of PLC?
Sep. 20 William Allyn, Jefferies’ trading director, sells 13,500 shares Pacific Lumber. was this to confuse people?
Sep. 20 Maxxam-ITC-Drexel meet. Rosen tells Jones, “Drexel is highly confident.” ITC reveals PLC file. talk about PLC charter and timing of offer Irving meeting notes with Maxxam (It appears p.2 is accidentally marked 9/10/85.) Plan to go to potential participants by 9/25 and tender offer by 10/7. Difference between $35 and $40 “will be funded by Drexel.” Mentions Irving’s file with call memos (re PL) “We do not believe that the existence of the file poses a conflict of interest for us.” Mentions 80%/5%.
ITC knew about PL on September 3, told its people to bid aggressively for PL Co-generation work on September 5, described the “target” as “conservatively” managed on September 10, produced a FAX to Garner on September 16, revealled the file on September 20, disengaged with PL on October 2, the date ITC formally confirmed its commitment to finance the Maxxam takeover of PL.
Sep. 22 (apprx) Bilger and Akerman tell Rosen Drexel is highly confident.
Sep. 23 Draft offer to purchase sent to members of Working Group (Centennial) from Farrenkopf.
Sep. 23 Irving meeting notes – Rosen/Kassan. They ask Irving to increase commitment to $150 million, then with “one other bank”, and Drexel’s highly confident letter, they can proceed with tender. “Comparison of old and new Proposed Financing Structure” included. Timing of the tender offer is discussed.
Irving memo (Fung) re meeting between Irving and Drexel. Quirk shared knowledge re timber assets, price and volume data.
Sep. 23 Between this date and 9/27/85, Josephthal & Co. purchased a total of 146,700 shares for Jefferies & co. in 10 separate transactions at prices between 28-1/4 and 29. “Sell” shows on CNS as a transfer to Jefferies. During this week, Jefferies informed Hurwitz that he “had accumulated the block of stock we had discussed”. The price of $29.10 was agreed upon. A draft of the option agreement was requested by Hurwitz, and sent by Jefferies’ attorneys to Maxxam attorneys. The Jefferies agreement with Transway was the model sent to Maxxam. Hurwitz testified the Jefferies contract with Minstar re: AMF was the model.
In June Drexel raised $300mm for Nortek (Papitto). In July Papitto bought $10 million in junk bonds for the “blind pool” assembled for Pantry Pride; Ex. of Drexel Daisy Chain: Drexel raised money for Nortek which buys Pantry Pride’s JB and Pantry Pride buys someone elses and so forth.
Jefferies filed a 13D on August 6, 1985 in Nortek’s takeover attempt of Transway. Nortek filed its 14D-1 on August 28th. Drexel was deal manager for Nortek. Boesky filed a 13D on August 21. Documentation shows that the Nortek contract with Jefferies for the purchase of Transway stock was used as the model for the so-called contract discussions between Hurwitz and Jefferies in late September.
Sep. 23 4,000 shares PLC bought by Bank Van Ernst and CIE, Switzerland through M.L.P.F.S., Inc.
Sep. 23 Andriba buys 3,000 shares PL
Sep. 23-26 Gordon buys 7,100 more PLC shares
Sep. 24 ITC informs Rosen ITC commitment is $175mm.
Irving memo, from Newcomb to Chevalier and Palmieri, Vice Chairs. Asks for underwriting approval of $175 million instead of $130 million. Borrower: “Pre-merger: Newco, Inc.; Post-merger: Survivor Company.” “Undervalued and under-utilized assets.”
Irving Credit Approval Sheet for $175 million/$300 million, with handwritten notes not on the copy we had previously. Note “until merger (release date)”.
Sep. 24 Cahill Gordon sends an “offer to purchase and related documentation” re Drexel-Centennial to Farrenkopf.
On September 24, 1985, TSG bought PL stock. On that same day Windsor Associates bought PL stock. The NYSE identified Windsor Associates as a hedge fund.
Sep. 24-25 Depending upon different references, TSG and Cohen and his wife’s Hong Kong/Majorca Andriba Company accumulate 18,000-38,000 shares of PLC
TSG (Mayfair) NV owned 12% by Maxxam & by Kramer, Levin joint partner, Stanley Cohen [“close friend of C. Hurwitz”] buys at least 15,000 shares of PL. This purchase is made through Bear Sterns as a courtesy to Rothschild, Inc.
Windsor Assoc. (Bernard Manks, Mark Oakley, Ed Russo, Jr., Frank Geremia and Diversco Corp.) buy 43,200 shares of PLC through Bear Sterns. Windsor Assoc. Said to be a Hedge Fund.
Sep. 25 Maxxam forms MXM Corp (Maine) for PL takeover
Sep. 25 ITC drafts commitment letter to Maxxam
Sep. 26 (day of the New York hurricane) NYSE closed?
Jefferies Co. purchased 539,000 shares of PL stock between Aug. 6 and Sept. 25
Kramer Levin informs Maxxam they cannot sign the agreement because it says “not for takeover purposes,” so Maxxam decides to just buy the shares outright.
Kramer, Levin informs Jefferies they “will not enter into any option agreement” (as allegedly planned on Aug. 5th), but its clients will instead just buy the PLC shares Jefferies accumulated (for them) outright
Hurwitz agrees with Jefferies to buy 539,600 shares at $29.10
Sep 26 Maxxam board decides to make offer [through its subsidiary MXM Corp. Financing reviewed.
Maxxam letter to Irving, naming the target as Pacific Lumber.
Winthrop Stimson 3 pg. fax to Bob Gray c/o Marty Balsam, “to deliver to Conf. Room 41D ASAP.” Includes two pages of legal codes, with hand-written notes “Payover Provision-First Boston” and “Drexel Pay-Over Provision.”
Unusual price movement in PLC stock per Hurwitz PLC stock trades 35,000 shares at $29.50; then increases in afternoon on only 11,000 shares and jumps in last half hour to $33 close. PLC stock rose +3-1/2 points on trading of 35,000 shares
|Name T.O.D.||No. of Shares||Price|
|Alder Coleman & Co. (trading acct.)||500|
|Bear Stearns & Co. (Creekside Group, NY)||1000||32|
|Donaldson, Lufkin & Jenrette (JII)||13,000||2.47|
|Merrill Lynch, Pierce, Fenner Smith, Inc. (Leonard Weill)||1000||31|
|Prudential-Bache Securities, Inc.|
|Quick & Reilley, Inc. (Shirley Corn Roslyn)||3000|
|Salomon Bros., Inc. (Rothschild/Zurich)||2000|
|Securities Settlement Corp. (Herbert Gordon) (tied to Rosen?)||1000|
Time Broker Buyer Price
Alder Coleman Trading Acct
Bear Stearns Solicitation
Pru-Bache Ruben Mark
Quick&Reilley Shirley Corn
Salomon Bros Rothschild, Zur
Sec. Settlement Corp Herbert Gordon
Merrill, Lynch et al Leonard Weill $31
Pru-Bache Broderick,a rep. $31.70
ear Stearns Creekside Grp $32
2:47 Donaldson,Lufkin (JII) ? ?
2:47-3 4 trades on Pacific Ex ? up to $33
Who did DLJ buy for and at what price? Who made the trades on The PSE?
Sep. 26 Possible inside traders identified by NYSE
Windsor Assoc. 43,200 81,100 shares
with MXM at 994,900, the “magic number” is 90,837
Sep. 27 New York Stock Exchange closed due to Hurricane Gloria.
Jefferies suspends PLC buy just below $15 million limit.
Hurwitz via MCO Properties (MCOP) and Maxxam Properties, Inc. (MPI) buy PLC shares from Jefferies at $29.10 (44,700 to MPI [for
500,000 total], and 494,900 to MCOP). (Maxxam claims this gives them 4.56%)
Note: According to Hurwitz, Jefferies sold them to Maxxam as follows:
The reason for the split is to keep both Maxxam and MCO Holdings below the H-R-S limit of $15 million. Essentially, he is trying to create the fiction of Jefferies accumulating stock for 2 clients, Maxxam and MCOH, thus avoiding the August violation of H-R-S.
BUT: According to Jefferies, the accounting trail is not so clear, and the decision to sell to MCO Holdings may have occurred after the fact.
Since the tender offer document of 10/2/85 clearly states the MCO Holdings position as owner of 494,300 shares of Pacific Lumber stock, it appears that Jefferies may have had to doctor their records to reflect this:
a) 9/27/85 – Jefferies form “DNS Input- Trading Room” Tags #4234 and #4236 show the following “buys”:
(1) 44700 PL 29.10 – Maxxam Group AC #890-84707-9-5
(2) 494900 PL 29.10 Maxxam Properties AC #890-84709-9-3
b) Tag #4238 is a “sell” tag, from 9/27 showing:
(1) 539,600 PL 29.10, commission “net” and a note on the side listing thesame acct. numbers and amounts and names as the two “buy” tags above. This is a “sell” from Jefferies accumulation account #00100-810-1-6.
Sep. 27 Boesky buys first PL stock (10,000 shares at $35, sells on 9/30 for $38) LL memo to IFB states, “The value of (PL is in) the timberland itself”
6:30 p.m. conference call – Hurwitz/Rosen/Lynch/Reid. MXM 6824 shows Milken called Hurwitz.
As of June 30, 1985 PL had 21,715,727 shares outstanding:
|Holders||Shares Held||% of Outstanding|
In the Spring of 1985, when MacAndrews & Forbes Holdings (Perelman) brought
37.5% of Pantry Pride stock for $60mm, a Drexel group Prime Capital Assoc. had brought $10mm to distribute to employees of Drexel.
The Pantry Pride takeover battle with Revlon occurred from 6/85 to 10/7/85. Revlon’s Bergerac came to Revlon from ITT where he had worked for Harold Geneen. Geneen at this time is a director to TSG. According to Predators Ball on Sept. 20, 1985 Geneen visits Bergerac to offer him a golden parachute bribe to complete merger with Pantry Pride.
In June, Perelman approached Bergerac (Pantry Pride-Revlon).
In the Summer, Perelman launched into hostile takeover arena with $750mm “blind pool”
Revlon announces buy back, “We have just cut-off Perelman’s balls and nailed them to the wall.” Bergerac boasts, Perelman seen as defeated.
In August, before Perelman bid for Revlon the only completed hostile takeover financed with junk bonds was CC-ANR turned friendly after first being hostile.
In Jul. Papitto buys $10mm junk bonds for “blind pool” for Pantry Pride; Ex. of Drexel Daisy Chain: Drexel raised money for Nortek which buys Pantry Pride JB’s and Pantry Pride buys someone elses and so forth (214)
Maxxam held $5,000,000 in Pantry Pride Pf on 10/3/85.
Sep. 27 Pantry Pride bid raised
Sep.? Perelman testifies in the Revlon suit, he had been looking at Revlon since Feb. or Mar. ’85, only decided in 2nd week of August to make offer. Howard Gettis, a Perelman spokesperson, in an interview points to Perelman’s interest in a Florida thrift as evidence of other interests. ***
In mega deals this year AC is a buyer, if not one of the biggest buyers of junk bonds
Sep. 28 Eager traders are ready to fill void created when Hurricane Gloria shut down stock exchanges in New York. William N. Allyn, trading director at Jefferies & Co., says business is 5 times normal.
Sep 28 Draft of Maxxam letter to Irving “Sept. ____, 1985” re: mandate to syndicate loan. Granting ITC an exclusive mandate to arrange syndicated loans, with indemnification.
Sep. 29 Kassen: ` Maxxam could not buy (Jefferies stock) since over…H-R-S limit.’ This was reported in ITC notes this date.
September 30, 1985
At 8 a.m.EDT/5 a.m.PDT, Hurwitz called Elam at home, woke him, and informed him Maxxam would take over Pacific Lumber Company.
Hurwitz then released public announcement of its 100% tender offer at $36.00 per share. document the actions taken to ensure $36 offer filed via 14D-1. See Oct 1 dated 14D-1 altered. Filing date had still been Oct 2.
Both Hurwitz and Elam called Salomon Bros. Handwritten notes “Elam-client?”
Elam called Salomon Bros. to ask for their assistance in defending PL from Hurwitz. Salomon agreed to work with PL. Initial PLC contract with Salomon Bros. for $100,000 per month. LL memo to IFB, dated September 30, states PLC hired Salomon Bros. Also states Maxxam market equity is $140mm, debt is $190mm.
Hurwitz asked Salomon, who had `done some mortgage work for part of Hurwitz’ far flung empire’ to raise money for his S&L entity UFG. Hurwitz asked Salomon Bros. to “do some more mortgage work” to raise money for UFG or to do the “Palmas Dart” depending upon the source.
In 1983 UFG-USAT contracted with Salomon Brothers and Goldman Sachs to sell USAT branch offices. In September 1984, UFG-USAT sold 20 branches to Independent American S&L. This sale built USAT’s networth to allow the issuance of a dividend to UFG and to allow the purchase of large amounts junk bonds. This sale is not listed in Goldman Sachs records as a sale by Goldman. The records of Salomon Brothers are not available to us on this issue. UFG disclosures refer to the sale and to the contracts with Goldman and Salomon and simply say that the contracts will be honored to the extent either was involved.
These relationships of Maxxam/TSG/Salomon Brothers are also composed of: First, Hurwitz’ relationship to Salomon through USAT’s business relationship as buyer of Salomon Brothers issues of mortgage backed securities; and, second, UFG’s engagement of Salomon to sell USAT branch offices in 1984. Hurwitz approached Salomon to do some mortgage work or to work on `the Palmas DART’ or “more mortgage work” on September 30, 1985, the day Hurwitz announced his first tender offer for PL.
Further, in April 1985, Maxxam and TSG filed a joint 13(D) for holding 13.5% of Informatics General, Inc. as a group, only to have the Drexel-engineered acquisition by Sterling leave Maxxam and TSG with a profitable arbitrage in August 1985 with Maxxam earning $1.5mm on the deal.
Remember – Stanley Cohen of TSG testified before Dingell’s Sub-Committee on 10/5/87. He was a “partner” in Kramer Levin and head of TSG. And TSG and KinderCare along with Maxxam, attempted to purchase PALCO Industries (the cutting and Welding Division of the old Pacific Lumber) in late 1986. See page 245 of Dingell’s book.
REVCO DS, a large chain of drugstores, was in the throes of reorganization and was searching for equity partners to stave off the bankruptcy which eventually overtook them in mid-1988. REVCO’s management is said to have simultaneously approached both Salomon Brothers, for aid in financing a leveraged buyout; and TSG, to bring in new equity. In September 1985, the officers and directors of REVCO contacted both TSG and Salomon Brothers in a search for equity partners in a planned LBO. Revco contacted both TSG chair Nathaniel de Rothschild and TSG president Cohen. These calls set up a series of three meetings culminating in Salomon presenting a draft engagement letter to the LBO partners Revco and ANAC. ANAC’s controlling partners included D S Partners, a Bermuda partnership controlled by TSG. DSP would control 51% of the new Revco. Salomon expected to make about $30 mm from the Revco buyout.
At the September 1985 meeting the Salomon staff attending was Harold Tanner, Managing Director Corp. Finance Dept.; Georg Khouri, Vice-President in M&A [coordination of transaction, reported to Michael Zimmerman, Managing Director M&A]; and James Wylie, Same as Khouri.
On October 11, 1985, the day Salomon Brothers was amending its contract with PL to profit from the sale of the company at $40 per share did they know Maxxam’s top price?, others in Salomon Brothers’ M&A Dept. met with the REVCO LBO group to work out the financing for the REVCO-TSG merger. Subsequently Salomon Bros. suggest ANAC. Eventually, Salomon would complete this LBO and its junk bond issuance of $1.8 billion driven by the takeover entity ANAC Holdings. ANAC was comprised of the REVCO management, Salomon Bros. and a TSG subsidiary, DS Partners (Drug Store).(36.2% of ANAC) Those attending this meeting were Dworkin, Wm. B. Edwards, (President & CEO old REVCO from June 1985), Khouri, Wylie, Golenberg, Mark Goldstein (Financial analyst from Salomon Bros. M&A Dept.) read Miller for members of Sal Bro M&A dept.
The Second Meeting was attended by Dworkin, Edwards, Golenberg, Wylie, Goldstein, and Allan Goldner (attorney/Benesch Freidlander at ANAC).
The third meeting was Edwards, Golenberg, Wylie, Goldstein.
On October 22, 1985, Salomon Brothers issued its fair deal letter to the PL shareholders for the Maxxam $40 tender offer. On October 24, while PL was filing its amended 14D-1 approving Hurwitz’ offer on Salomon Brothers’ advice, Salomon Brothers was meeting with REVCO and TSG, deciding to make the REVCO-TSG merger Salomon’s first attempt as lead manager at an LBO financed by junk bonds.
At the October 24 Meeting Salomon presented a draft engagement letter to Dworkin and Golenberg as both financial advisor and underwriter. Salomon expected to make $26 to $31 million.
Was MM parking stock in Wickes in plan to dump Salomon from Wickes JB issuance? In April, Icahn attacked TWA passed 5% on the 29th of April, 10 days later files 13D with 20%. TWA seeks White Knight: Frank Lorenzo; Lorenzo hires Drexel. TWA (a Drexel client) hires Salomon Bros. (`did not trust Drexel’). These demonstrate the competitiveness of Drexel and Salomon. Salomon was losing clients to Drexel and following the PL takeover they lost PL and during early 1986 they lost UFG as a client. Since this condition precede the PL takeover the influence of these contacts from Hurwitz and TSG have a more dramatic quality.
December 13: Salomon approves representation.
Jan. 24 Initial mtg. re: financing with REVCO, Salomon, TSG
January: Line up banks (Wells Fargo, etc.)
January 24 Meeting: Re Financing: Wells Fargo (Sheppard Pryor, IV, James Johnson), Dworkin, Edwards, Hudson, Golenberg, Robert P. Mersel (TSG), Khouri, Wylie, Warren Foss (Managing Director of Salomon), and Carlo Guillo in Salomon’s Corp. Finance.
Feb. MPI begins selling TSG stock
Mar. 03 Bank financing secured for REVCO LBO
Mar. 05 Investor group & Salomon Bros. meet to discuss full proposal
Kramer Levin appears as TSG’s & DS Partners’ law firm in the Zaretsky Report. Ezra Levin of Kramer Levin was a Maxxam Board member.
On November 6, 1986, ANAC filed a registration statement. Kramer-Levin was paid for TSG’s stock acquisition and for TSG’s sub DSP’s legal work.
Dec. 18 Final prospectus issued by NAC. ANAC becomes driving force behind REVCO LBO & an alleged fraudulent conveyance. ANAC prior to the REVCO LBO was an uncapitalized corporation whose sole stockholders were Dworkin, Sidney, and D.S. Partners, LP, a Bermuda partnership controlled by TSG.
After December 19, 1986 holders of common stock:
|Investor||Investment||Number of Shares||Stock %|
|Jeffrey Golenberg (Glenn’s Son)||$52,095||7,500||0.1|
|Robert Golenberg (Glenn’s Son)||$52,095||7,500||0.1|
|Salomon Bros. Holding Company, Inc. (“Salomon Holding”)||$3,084,371||444,050||8.3|
|Harbour Investments Ltd. (“Harbour”)||$1,760,464||253,450||4.8|
|Public (issued in connection with the Units discussed below)||$2,604,750||375,000||7|
ANAC was the moving force behind the takeover of REVCO by new REVCO. In the process Dworkin unwinds his relationships resulting in his direct involvement in ANAC disappearing.
ANAC, after the REVCO LBO closed, D.S. Partners control ANAC, management investors hold 27%, Salomon Bros. hold 8.3%; are the three largest stockholders.
Dworkin says after LOB closed REVCO and ANAC are run as one company. (Thereafter under D.S. Partners control. Thereafter under TSG control.)
Sep. 03 ANAC Holdings Corp. buys out REVCO
Oct. 05 Dingell revelations re; TSG buying Internorth in Internorth-HNG, PL, Hoover Universal (along with Rosen & Kassan) & Mirabank; a Phoenix S&L prior tender offer announcements
Dec. 10 TSG also a partner in Seligman & Latz, Inc. (of Banner Industries)
Dec. 12 Steiner raises stake in TSG from 5% to 35%
Apr. 05 TSG has a stake in Banner Ind.(Steiner) & Banner has a stake in TSG.
Jul. REVCO goes insolvent
Jan. Steiner’s Banner Ind. shows TSG as an affiliate
Jan. 06 REVCO in reorganization: delinquent paying interest trading $.75 on the dollar in secondary market
Irving Trust Company
Irving Trust Company (ITC) delivered on September 30, 1985, its letter to Hurwitz committing $300mm for the takeover but it was days before ITC informed PL it could not help PL raise funds for its planned biomass conversion plant; plans ITC had been working on for several months with Pacific Lumber!
IRVING AND BANKS/DREXEL/MAXXAM
History of banks group “syndicates” (list of other banks list – key contracts)
ITC as leader organizer
Drexel’s role in developing “mezzanine” and “bridge” financing (Milken thought he could get 3 for 1 1 = equity – 3 = debt [part of debt is bridge part of debt is junk])why ITC? PL contacts? Equity created through air funds.
ITC did financing for Hurwitz bid for AMF
7/85 – ITC called in by Drexel to discuss PL financing
7/26/85 – first meeting. ITC is hired by Maxxam on 7/26 to consult on possible acquisition in timberpost air fund, pre-Jefferies, post maxxam brd meet. ITC puts together financing structure (see AMF/centennial comparison memo)
8/23 – discussion re takeover financing – $160 million
9/3 – ITC told name of company
9/9-9/12 – Maxxam and ITC meet dailynotes re jefferies option?
9/20 – Basic facts/strategy of deal/80% clause/etc.
9/23 – ITC commits to $300 million Note conflict of interest – ITC/PL contacts during this period (see item 8)
Drafts of Agreements (ITC = 175, others = 125)
9/25 – Draft commitment letterwhy then? What actual approval date, related to run-up?
9/30 – Final commitment letter Final drafts/bank commitments/signature on covenants
10/3 – first syndicate meeting?when did organizing begin? Irving correspondence Dingell letter re fraudulent conveyance (ITC to Maxxam) Irving/PL cogeneration plant; conflict of interest?
2/28/84 – Internal memo of ITC re visit with PL in San Francisco. Discussed an LBO!!!
3/84-8/84 – Memos re conservatives at PL
3/83 – Visit with PL. discuss cogeneration plant financing
8/85 – Roger Jones first discussed timber acquisition with Maxxam
8/28/85 – Garner of PL contacted by ITC’s Watt re cogeneration financing
8/30/85 – Watt writes to bus. finance person re cogeneration financing
9/5/85 – ITC internal memo re PL cogeneration – conflict of interest date
9/16/85 – Letter to Garner re financing structure
10/3/85 – ITC informs PL they can’t deal with them because of Maxxam why this date?
MCO Holdings opens new account with Jefferies & Co. Acc. 890-50098, signed by Leone & Bressler on 10/7/85.
MXM Corp. certificate of Incorp, Delaware, 10,000 shares and Secretary of State seal.
September 30 Drexel places Maxxam & PLC on restricted list
Hurwitz met later in the day with Drexel and Milken to finalize financing fees and so forth. On or before this date Hurwitz negotiates directly with Milken and again with Fred Josephs re: warrants. (On September 10 a calendar shows “CEH appt” at Fred Joseph). Hurwitz/Drexel “memorialize” agreement but fight over $. The number of warrants for PLC stock dropped from 500,000 to 250,000 to settle disagreement. 250,000 warrants values at $906,000 on 3/29/89. Warrants are for purchase of Maxxam shares at $15 per share, cash.
Cahill Gordon sends draft “highly confident” and “investment commitment” letters to members of Working Group.
Following these meetings Milken told Boesky to buy PL stock in a secret arrangement with Drexel taking the profit or loss as part of the Enterprise, as evidenced by the March 1986 payment from Boesky to Drexel? to settle their secret arrangement’s imbalance.
PLC stock rose $6/share to close at $39 on N.Y.S.E.
Prior to the PL takeover Boesky and Jefferies had an arrangement which included numerous deals. Likewise, prior to the PL takeover, Milken and Jefferies had an arrangement which included numerous deals.
It should be noted, that by this date Milken could be said to control Drexel by virtue of Milken being the largest Drexel shareholder.
Milken and Hurwitz acted together in the PL takeover. Milken and Hurwitz acted together in other deals prior to the PL takeover.
For instance Milken and Hurwitz acted together to control UFG-USAT.
UFG-USAT’s purchases of Drexel underwritten bonds began about the time that the planning for the PL takeover began and continued for a period thereafter, as did the various refinancings of the PL takeover debt. These purchases may have been part of a plan by Milken and Hurwitz to provide “equity” and “access to capital” required to keep Milken’s money machine running for the benefit of both Milken and Hurwitz.
Sep 30 In the three months ending Sep 30, MPI purchased $190 million of mortgages financed by reverse repurchase agreements.
Sep. 30 Maxxam owns $8.5mm of First Executive Preferred what did elic own of H entities?
Oct. 01 Jefferies form “Cancel and Correct” went through as follows:
“Cancel: 9/27 bought 494,900 PL 29.10
Correct: 9/27 bought 494,900 PL 29.10
Please correct A/C#
New A/C correct”
Oct. 01 Boesky begins buying PLC for Drexel. Maultasch of Drexel monitors buy daily; during the Maxxam/Drexel “restricted” period.
Boesky buys 51,500 shares at average of $37.84
Oct. 01 PLC opens at $39 drops to $37.12 closes at $38.25
Oct. 02 Maxxam-Drexel (west coast)-Irving meetings re: financing
Irving letter to Maxxam Group, signed by Newcomb, confirming “that we are confident that we can obtain aggregate commitments of $300 million.”
Mandate to syndicate loan, Maxxam letter to Irving, signed by Rosen, accepted by Jones.
Irving letter to Maxxam, commitment letter for $175 million, signed by Jones and Rosen.
Maxxam letter to Irving with agent’s fee and arrangement fee; and a list of approved banks.
Drexel letter to Maxxam – “highly confident”.
Oct. 02 Maxxam raised tender offer to $38.50, published W.S.J. ad announcing offer & filed 14D-1 (which says timber worth $750 million – $1.2 billion). (on Sep. 20, they used the valuation of $2 billion for the timber which Drexel & Hurwitz had in their presentation to Irving Trust for financing)
On October 2, 1985, Maxxam filed its 14D-1 at $38.50. Maxxam filed pursuant to H-S-R. Maxxam’s PL holdings, with Boesky’s shares held for Drexel, surpassed 5%. So why the beef over which entity bought the stock? Perhaps it gave more control over PL to H through MCOH’s participation. MCOH’s bond issuance had to be invested somewhere. MCOH held 10% of MXM-13 but no voting stock.
Oct. 02 Financing for PLC takeover was for an estimated total of $823 mm secured by:
$400 mm Drexel issued junk bonds
$300 mm Irving Trust ($175mm) and
other banks ($125 mm)
$123 mm general corporate funds
Dingell at 222 gives junk bond total at $450mm
Oct. 02 Hurwitz /Drexel hold over 5% PL; Fail to file 13(D). See October 5/6 (Note: 13(D) must be filed within 15 days of reaching 5% [Hurwitz & Boesky]
Oct. 02 Irving letter to PLC, Salomon letter to Maxxam both to “disengage”
Oct. 02 Citicorp calls Elam & suggests venture capital leveraged buyout
A “Cancel and Correct: form went through as follows:
“Cancel: 9/30 bought 44700 PL 29.10 Account 890-84707-95
Correct: 9/30 bought 44700 Pl 29.10 Account 84709-93
Please correct A/C#
By the end of the reporting period (10/25/85) Jefferies’ computer runs show:
“494,900 PL 29.10 delivered $14,401,590 average price shown-details on request as of 9/27/85.
Attn: Frank Latronica
10880 Wilshire Blvd.
Los Angeles, CA 90024″
“44,700 PL 29.10 delivered $1,300,770 average price shown-details on request as of 9/27/85.
“Maxxam Properties, Inc.
Attn: Glen Kassan
350 Park Avenue 12th Fl.
NY, NY 10022″
Oct. 02 The Jefferies invoice ticket, processed 10/2/85, is addressed to the same address as above for Maxxam Properties, and the same account number. It is for 44,700 shares. Strangely, though the amount of “Principal” is shown at $1,300,770, but the “net amount” of the invoice shows only $300,770. Is this just a bad copy, or was $1 million dropped?
Oct. 02 Executive Committee of MCO resolved to cause MCOP to enter agreement with Maxxam to enable MXM to commence tender offer.
According to the author of Den of Thieves, Stewart, the double threat of Milken information and Boesky’s buying power reached its apogee in the takeover of PL. PL fought vigorously for its independence. Milken demonstrated the futility of resistance. As soon as the bid was announced Maxxam retained Milken to handle the financing. Milken immediately instructed Boesky to begin massive purchases of PL stock in anticipation of a higher offer and as a tactic to pressure PL into accepting Maxxam’s offer. The perception that it was the feared Boesky who was amassing stock had been one of the factors that caused PL to capitulate.
Maxxam’s Stock Under Milken Management
Langhorn Reid is quoted as saying that there were other things for Milken and Hurwitz to talk about in late September besides their alleged dispute over the number of Warrants Maxxam would pay as a fee to Drexel. “It is important to remember that Hurwitz had a Savings and Loan, he had MCO, he had a pool of money in Maxxam that I assume he invested part of in High Yield bonds, maybe.”
In October 1985, Maxxam’s holdings included obvious signs of Milken management. Maxxam stock holdings included 15 companies of which 8 were Drexel clients. First Executive was one of these. Seven of the 15 involved Boesky, 5 involved both Drexel and Boesky. On December 31, 1985, Maxxam stockholdings included 17 companies of which 4 are Drexel clients, 4 involved Boesky, 3 involved both Drexel and Boesky. Note that none of these snap shots of Maxxam holdings represents a true picture of Drexel’s control of Maxxam’s investments.
Maxxam’s Meichelbeck sent a memo to Hurwitz, Rosen, Affinito, Kassan re how to raise $112 million cash in the near term. .This was a plan to liquidate stocks. According to the memo Maxxam held the following amounts of the issues listed. Amounts are in million of dollars calculated on a cash basis:
Other risk arbitrage 78.488*
Mged. portfolios 28.100*
American Brands Pf 2.235* Boesky long Mar.’86
AMF debentures 1.285* Acquired by Minstar
Pantry Pride Pf 5.000* Perelman**
Coastal Corp. Pf 16.014* Wyatt
Mesa Petroleum Bond 5.025* Pickins
Tennaco Pf 3.566*
First Exec. Pf 8.350* Carr
Phillips notes 9.867* Icahn/Boesky(Drexel)***
Various variable rate Pf 4.191*
SPC Pf “A”
* Simplicity, no amt. shown (Per Kassan Ex.)
**See Drexel/Milken at Spring 1985 & Sep. 20, 1985
*** See U.S. v. Drexel, Count 25
For additional Maxxam-Drexel-Boskey ties through Maxxam’s investments. See Exhibit XVI
Drexel presents PLC-defense analysis to Maxxam. See especially the white knight discussion
Kramer Levin sent a letter to Newcomb (Irving) re: Maxxam transaction, enclosing a copy of the captioned 14-D-1 filing with exhibits.
Maxxam (Kassan) sent a letter to Jones (Irving) enclosing checks for arrangement fee and facility fee; Check #4 for $437,500, arrangement fee; and check #5 $437,500 facility fee.
Manny Perelman (Plaza Securities, NY) calls Elam & says “financing available for $40-45 per share”; suggests partnership for redwood lumber
Larry Higby of Americal Appraisal calls Elam. Purpose unknown
Forstman-Little, Adler-Shaykin appear as white knights for a competing Revlon deal in an announcement on this date.
Maxxam Board meet regarding MCOH’s participation in the PL takeover. The financing was reviewed.
Affinito in her deposition said that Maxxam would not have had trouble raising the $19-20 million MCOH contributed to the purchase.
Agreement between MCO Holdings and Maxxam Group, Inc. negotiated (Iaco, Bressler, Schwartz-MCOH; Affinito-Maxxam).
Jefferies & Co. deliver 494,900 shs of PLC to MCOP and 44,700 shs of PLC to MPI. Maxxam’s Jacques Lazard signs an altered stock purchase form. It is a Drexel form with Drexel crossed out, and Jefferies penned in. A possible explanation is that Drexel was involved in the purchase of the Jefferies’ shares.
On August 20, 1985 the FBI siezed Centennial Savings. On October 4 Ca 1st Dist Cong Bosco issued a statement in support of Centennial’s owners but it was withdrawn when a Bank political action committee criticized him in the media. Bosco issues press statement opposing takeover but withdraws after Hurwitz took him to lunch.
Oct. 05-06 Hurwitz & Boesky pass 5% of P.L. 13(D) due Oct.20-21
This was the original date on which tender offer was going to be announced according to the ITC handwritten notes. Hurwitz, Dingell at 26, states Oct. 1 was date until Sep. 26 decision to advance date to Sep. 30.
Irving memo from Newcomb to Marion re the 10/9 bank meeting and luncheon. Expecting 12 people.
Kramer Levin letter to Jones (Irving) enclosing latest draft of Drexel term sheet.
Memo from Kassan to Newcomb re Maxxam investments as of 10/4/85.
Lists shares and amounts held in Gen. Foods/Eckard/Amer.Hosp./TWA/SCOA Ind./MGM.
Manny Perelman called Elam to ask when directors will meet.
Pantry Pride raised its bid for Revlon again. Game ends. In 24 hours, Drexel raises $350mm, highly confident of another $350mm. The conquest of Revlon ended an era. The JB marauders had won here and if so they could win anywhere. (227) It’s the dislocation or destruction of…tangible reality that make hostile takeovers so fraught with emotion. The world had changed and it had not changed for the better. Revlon’s defenders alleged but failed to prove violations of the law. They remain convinced violations are there
Oct. 08 Josephthal letter to NYSE re activity in Pacific Lumber stock 9/23-9/27.
Maxxam letter to Kramer Levin thanking them for help in ITC commitment.
ITC credits Levin for bringing Maxxam to ITC.
Memo from Newcomb to Marion re 10/9/85 luncheon meeting, listing those participating, including 7-people from 4 banks.
Oct. 09 Salomon advised PLC Board that $38.50 was too low. (Said PL was worth up to $60 per share) PLC Board rejects Maxxam’s offer & adopts amendments regarding retirement plan, golden parachutes, 80% Rule invoked
PLC files suit v. Hurwitz in N. Dist. Cal. Drexel was not named.
Oct. 09 Maxxam held its meeting with various banks (a syndicate) re: PLC.
Agenda of Bank Meeting hosted by Irving.
Fung produced a list of meetings between Maxxam and Irving, from 7/26/85 to 10/9/85, listing participants and topics.
PLC files with SEC its 14D-9 opposing takeover
PLC letter to shareholders says $38.50 is unfair
Maxxam (Farrenkopf) letter to Manufacturers Hanover Trust, with draft copies of depository agreement between MXM and Man Han.
Oct. 10 NYSE letter to NASD re Pacific Lumber trading – Jefferies & Co.; Larkin & Co.
Oct. 11 NYSE letter to Maxxam, with questionnaire
Oct. 11 Maxxam board meeting
Oct. 11 PLC and Salomon supplement Sep. 30 contract- $2.5 million if PLC independent, or .5% of purchase ($4.3 million as it turned out) (shareholders never told)
Oct. 13 For a Drexel produced Holders Matrix, See Exhibit XVIII. For a chart of PLC stock activity see Exhibit XIX
Oct. 15 Rosen says Hurwitz uses Salomon Bros. for —– and acquisition opportunities (47-53)
Oct 15 Irving final invoice to Maxxam for financial consulting services – June – Aug. 1985 $48,937.
Oct 16 Letter from Jones to Kassan (Maxxam) enclosing invoice of 10/15/85.
Oct. 16 PLC filed petition with Federal Reserve Bd.
On October 17, 1985, Maxxam failed to file 13D as required.
Oct. 18 Hurwitz (MXM) files suit v. PLC in Maine to invalidate Oct. 9 decisions
Oct. 18 Rosen calendar says “RR to SF”
Oct. 18 Hurwitz and Rosen/Stanford Court Hotel Oct. 19 – meeting with Elam?
Oct. Quirk produced his Chronology of work performed
Oct. 19 Hurwitz/PLC BOD/Drexel begin talks (around the clock) re: friendly takeover
Oct. 20 UFG and North Park S&L in Richardson, TX fail to agree on terms to purchase USAT branches
In May, 1985, Gaubert forms East Texas First Pac (ETF) with Sunbelt, Vernon, IASLA, Commodore and North Park and their execs making large contributions. North Park’s Bob Franks helped Gaubert obtain IALSA in 1983.
Jim Wright promised to kill a bill if ETF raised $250,000 for him.
Commodore’s Chair, Pres. & new Chair were charged with funneling S&L money into ETF. All guilty from 2-43 counts. Chair J. Harrell quotes Savings League lobbist Durwood Curlee saying he (Harrell) had been following Curlee’s Golden Rule: “He who has the gold, makes the rules”.
Oct 21 Maxxam cover letter form Kassan to Jones, no contents listed.
Maxxam (Kassan) letter to George Sievers, SVP of J. Henry Schroeder Bank & Trust enclosing the tender offer and Drexel’s private placement memo. Asks Schroeder to be the trustee for the 2 debt issues.
Maxxam letter to Merrill, Lynch asking to borrow $100 million and putting up Maxxam’s securities as collateral ($161 million)
Signed committment letter from Creditanstalt to Maxxam for $25 million.
No Date Blind memo to Newcomb, cc: RR; RJ., “Please note that the sale of assets, increasing the cut or obtaining any excess pension funds are hypotheticals that must be looked at after the tender is completed.”
Attached is Centennial charts “cut and Price” data.
Oct. 20/Oct. 21 Hurwitz files no 13(D)
Oct. 22 NASD asked Jefferies for listing of Pacific Lumber transactions for August and September.
Oct. 22 Boesky holding 1,099,300 shares (5.1% of PLC shares). Drexel/MM were beneficial owners
Oct. 22 Hurwitz owns more than 5%, Drexel owns more than 5%, 8p.m. PDT
On October 22, 1985 the PL board agreed to merge with Maxxam. For a chart showing sequential purchases of Maxxam, Jefferies, Boesky,
Oct. 22 Maxxam’s tender offer & plan of-merger accepted by PLC Board; Board also repeals 80% requirement, repeals $60 million pension vesting, give Maxxam option and agrees to $21 million cancellation fee. Salomon advised PLC Board that $40.00 was fair
Oct. 22 PLC gives Hurwitz control of Pension Fund PLC shares
Oct 22 Signed committment letter from Bank of Nova Scotia to Maxxam for $50 million
Oct 23 Maxxam letter to Newcomb (Irving) (Note enclosing signed commitment letters Date!) and facility fee checks from Bank of Nova Scotia and Creditanstalt.
Maxxam check to Bank of Nova Scotia for $125,000 – Ch #6 10/23/85.
Check from Maxxam to Creditanstalt for $62,500 – Ck. #7.
Oct. 23 Hurwitz announced the $40 offer
Oct. 24 PLC files amended 14D
Oct. 24 PLC Board files 14D-1 with omissions and falsehoods
Oct. 24-28 Maxxam and Pacific Lumber file amended 14D-1; 14D-9; both fail to disclose essential facts (80% rule, 5% ownership, Salomon fair deal letters).
Oct 24 Maxxam memo, Kassan to Farrenkopf, with copy of Nova Scotia commitment letter, and “I have requested the same for the Austrian bank from Irving Trust.”
Oct 25 Signed committment letter from NatWest Bank to Maxxam for $25 million.
Maxxam memo from Kassan to Hurwitz and Rosen re individuals interested in buying certain subsidiaries of PL (Ron Jackson – Cyclomatic) (Ed Moorhead – cutting and welding).
Oct. 25 PLC files amended 14D-9 failing to disclose 80% rule trigger
Oct. 28 Hurwitz files amended 14D-1, (MXM) Drexel fails to disclose 5% ownership
Oct28 Maxxam letter to Newcomb, Irving with NatWest letter and check to NatWest for $62,500.
Oct 29 Irving memo from Jones to Dorothy Fowler, re credit commission, attaching a check for $250,000 representing 1/4% arrangement fee on $100 million credit placed for Maxxam.
Maxxam memo, Kassan to Rosen, with a chart showing cost of borrowing.
Maxxam memo, Kassan to Farrenkopf, with copy of NCNB commitment letter.
Schroder Bank (Sievers) letter to Kassan, Maxxam re willingness to act as trustee, registrar and paying agent for the junk bond debt.
Undated Two page chart (Irving?) compares terms of AMF deal and Centennial deal.
Oct. 30 Murphy v. PL filed. Stanwood Murphy was a significant shareholder, a member of the BOD and with his older brother were seen as the family of the mythologically family owned PL. This litigation merged with other litigation over the next five years to become US v IF Boesky or In Re Boesky.
Oct 30 Irving memo, Jones to Fowler, re credit commission, attaching a check for $62,500. Arrangement fee on credit placed for Maxxam.
Maxxam letter from Meichelbeck to Newcomb (Irving) enclosing two checks dated 10/30/85: #11 – $62,500 to National Bank of North Carolina; #12 – $62,500 to Irving Trust Co. both Maxxam checks signed by Kassan and Meichelbeck.
Winthrop Stimson letter “to persons on attached distribution list” re amendment to Maxxam commitment letter, changing terms —> zero coupon bonds are now extendible. Notify by telex. Maxxam wants to announce 11/1/85 (to Nova Scotia/CreditanStalt/NatWest/NCNB/Irving).
Oct 31 Form of telex from Kassan re execution of commitment letters by 5 banks.
Irving letter to Maxxam re amendment to the PL tender offer commitment letter, signed by Jones and Kassan. Same, signed by Creditanstalt-Bankveran, by Bank of Nova Scotia, by NCNB of No. Carolina, by NatWest.
Maxxam letter (Kassan) to Robert Gray/Martin Balsam/Farrenkopf/David Bloom/Roger Jones/John Newcomb, enclosing a copy of 10/31/85 amendment. Original for Bob Gray.
No Date “Instructions for Execution and Delivery of Commitment Leters” re securities purchases – telex to Lorraine Spurge, Drexel, Beverly Hills.
Lynch files false affidavit, at request of Maxxam, in Murphy v. PL that Drexel owns no shares of PLC.
On October 31, 1985, Drexel filed a false affidavit (Lynch) in Murphy v PL, hiding drexel ownership of Boesky’s PL shares. Maxxam had requested the affidavit.
The Boesky 13D
On November 1, 1985, Boesky filed a false 13D, failing to disclose Drexel ownership of PL shares and mailed the false 13D to PL. Had PL received an accurate 13D the Board may have exercised the 80% rule or, given cause, rescinded its mutual cancellation agreement with Hurwitz.
On November 4, 1985, Maxxam requested an affidavit from Boesky to support the lifting of a TRO in Fries v Carpenter.
Hurwitz claimed to have studied Boesky’s 13D with respect to PL in November 1985 and found nothing of concern in it. (Note that in March 1986, UFG-USAT purchased IF Boesky Co notes through Drexel in support of Boesky’s enterprises. Hurwitz, even as late as October, 1987, continued to defend all participants in the PL takeover by telling Congress, under oath, that he (Hurwitz) saw no illegalities or improprieties in the PL transactions.)
Oct.- Nov. Drexel Enterprise/MM-HYD raise $450 million in junk bonds for PLC takeover. $180mm extendible notes and $615mm face amount (x .430928 for value) of zero extendible notes (increasing rate notes). No mention of Drexel ownership position on PLC
Nov. Slack v. Hurwitz filed
Nov. 01 Drexel fails to file 13(D) or amend Boesky’s
Nov. 01 Boesky files false 13(D) with SEC showing his purchases “for arbitrage and investment purposes.” Mails same to PL failing to disclose Drexel/MM ownership Boesky bought 1,843,000 shares PLC, Sold 769,000 (up to Nov. 1) Boesky holds 899,300 shares PLC or 4.1% outstanding purchased over past 60 days at an average price per share of $38.94
Nov 1 Telex to Jones from Kassan, confirming execution of amendments and bank executions including Bank of Scotia
Maxxam memo, Kassan to Roger Jones, Martin Balsam, Robert Gray enclosing a sheet with working capital and current ratio for PL for last 5 years.
Nov 3 Drexel letter to junk bond purchasers re PLH private placement. Closing is 11/4, actual funding 11/8.
Nov 4 Telegram to Roger Jones from Cong. Doug Bosco: “Be advised that I have today introduced legislation affecting Maxxam bid for PL. Authorizes expansion of Six Rivers National Forest to prevent accelerated cut of redwood timber.”
Irving letter Newcomb to NCNB of North Carolina re a $25 million participation in Irving’s $175 million commitment, separate from NCNB commitment to MXM within the $300 million, accepted by NCNB.
Maxxam letter from Kassan to Farrenkopf/Balsam/Bloom/Gray/Jones/Newcomb, enclosing telex and sending Gray the signed amendments.
Nov. 04 Fries v. Carpenter filed (“Gold” suit, gets TRO to stop takeover Nov. 4)
Nov. 05 N.H. memo to IFB says Danelow of Kramer Levin wants affidavit re: PLC in support of Writ of Mandamus to end “costly delay”.
Nov 5 Winthrop Stimson letter to Kassan enclosing copies of signed amendments of Irving, NCNB, and NatWest.
Nov 6 Maxxam, Kassan to Jones (Irving) attaching copy of “several press releases that we have issued in the last day or so.”
Amendment #2 to bank commitment letter, (3 copies) signed by Nova Scotia/NCNB/Creditanstalt.
Nov. 07 Murphy v. PL dismissed
Nov 7 Copy of Northcoast Environmental Center letter to SEC.
Irving memo, Fung to Halpin, CRD – Syndications Support Dept. re Credit Commission on MXM facility. Fees as of today $1.1875 million should be posted as credit commission instead of commitment fee or interest.
Irving memo, Jones to Halpin, re: Pacific Lumber Holdings $300 million commitment. “Certain features are non-standard”. Note bank sign-up dates from 10/2/85-10/29/85, with Term Sheets,
Agreement date, 11/8/85. Expiration date, 3/31/88. Period 10/2/85-10/1/87. Mandatory repayment one year after Delaware merger, but not before 4/1/87 or after 3/31/88.
Nov. 08 Boesky entities tender PLC shares: Seemala (920,300), Farnsworth (149,000), Northview (500,000) totaling 1,469,300 shares
Nov. 08 Tender offer expires & Maxxam owns 13.1 million shares (approx. 60%)
Nov. 08 Ninth Circuit affirms Schwarzer ruling that Maxxam owns 25%
Nov 8 Term Loan Brief (Irving). Includes a participation:
|Nova Scotia||$50 million||16.67%|
Includes long list of covenants – what PLH is permitted, not permitted to do; and sample copies of certificates as to financial statements and compliance with covenants.
Guaranty Agreement between Maxxam, “The Banks”, and Irving Trust, signed by Kassan, Jones, Nova Scotia, Creditanstalt, NatWest, NCNB. Note 2nd paragraph “and in consideration of the premises and the sum of one dollar.” This document includes an attachment which lists the subsidiaries of Maxxam Group, and includes MXM-1, through MXM 12, MXM Corp. (Maine), and PLH.
Securities Purchase Agreement between PLH, Maxxam, and “the Purchasers.” unsigned. (we should get the signature pages for all the junk bond purchasers.) Registration Rights Agreement between PLH, Maxxam, and the Purchasers (draft 11/6/85).
Credit Agreement between PLH, the Banks, and Irving Trust, $300 million, signed by Irving and banks.
Nov 15 Irving memo – call report – Jones, re Kassan explaining Maxxam’s 3rd quarter earnings. Real estate was break-even, and securities accounts for profits.
Irving memo, Newcomb to Palmieri, reporting on syndication so far. Lists 20 banks contacted, and the “difficulties cited by banks declining to participate”, (This is interesting and would have been helpful if we had during deposition). Time table is also significant. Says “‘turning point” was 10/21, when Creditanstalt committed. Appendix I and II also interesting.
Maxxam letter, Farrenkopf to Jones (Irving) enclosing the Cert. of Amend. to Cert. of Incorp. changing name of MXM Corp. to Pacific Lumber Holdings, dated 10/31/85 and signed by Secretary of State 11/1/85.
Nov. 18 Schwarzer enjoins Gold, Gold gets stay
Nov 18 “Presenter: Roger Jones, Vice President Commercial Banking” re PLH, includes pro-forma balance sheet on Pacific Lumber. Describes collateral pre-merger and post-merger.
Nov 22 Irving letter to PLH acknowledging receipt of the 11/15 letter and PLH incorporation name.
Irving letter from Fung to Meichelbeck (Maxxam) with Irving DTC transfer instructions for account PLH “collateral pledged”.
Irving memo, from Eisner to Fung, re Custody Account for PLH, “which will contain approximately 20 stock certificates valued between $40 and $80 million as well as an unspecified number of shares held in DTC. This account is to be held as collateral for a loan for use in a tender offer for PL”.
Nov 26 Irving memo, Eisner to Fung, re Custody Account for Maxxam Group, Inc., “which will contain an unspecified number of shares held in DTC valued at $10 million…for use in a tender offer for PL” Handwritten note at bottom, “540,000 shares UNC; 42,000 ABC”.
Nov. 29 Reinquist lifts stay
Nov. 29 Maxxam gets 61% of PLC
Nov. 30 Maxxam names appointees to PLC BOD
Nov. 30 PLC amended bylaws to opt out of Sec. 910 of Maine
Dec. Donald K. White in the SF Chronicle Business pages says (Boesky’s profit on sale of PLC “we can assume it was at least $10mm”. “Levine told Boesky… about the PLC deal…and shared in his profits”
Dec. Drexel receives $20.5 mm + 250,000 worth warrants from PLC transaction as fees from Hurwitz. These are 5 years common stock, $15/share. AB does not believe Maxxam warrants were exercised by Drexel
The ultimate price paid by Maxxam for PLC shares was $750mm
Dec. Drexel issues “highly confident” letter for $3.8 billion for Sam Heyman in GAF-Union Carbide. Greenmail results Milken raises committment letters for $3.8 billion in 3 weeks before Heyman greenmails Union Carbide.
Dec. Papitto buys $50mm JB’s for GAF-Union Carbide. Drexel has raised $600mm for Papitto since ’83
Dec. Junk bonds go from “1st tier” investors to “2nd tier” investors freeing “1st tier” “mega players” for GAF-Union Carbide
Dec. Drexel affiliates:
Lambda II Partnership: Senior employees in Drexel Corporate finance Dept.
Rocam Association: MM, LM, Ackerman, Davidow
Mordon L.P.: MM, LM, Ackerman, Davidow, Cameron and BILP
Bass Investment L.P.: MM, LM, Ackerman, Davidow and Reed Harmon
Camont Investment, Inc.: MM, LM, Ackerman, Davidow
$14.8 billion in new junk bond issues, $8.3 billion through Drexel
Dec. Jefferies Group posts huge loss, stuns investors. Lost $2.2 million compared to $4.4 million gain a year before.
Dec. 01 “Murphy II” filed in Maine, transferred to Schwarzer, Murphy v. Hurwitz
Dec 1 Trust Indenture between PLH, Maxxam, Schroder Bank re $615 million sub-notes.
Dec 2 Irving letter, Fung to Meichelbeck (Maxxam), with instructions on how to transfer securities into the $10 million marketable securities pledge account.
Dec. 02 Jefferies letter to NASD surveillance with completed questionnaires.
Dec 3 Irving Trust – Federal Reserve Form U-1, signed by Kassan, PLH, and Jones, Irving. Lists 22 million shares PL common at $40 = $880 million; and 10,000 shares PLH at -0-; and 100 shares MXM at -0-; Annex B lists 540,000 shares UNC = $5.2 million; and 42,000 shares ABC = $5.029 million.
Irving Trust letter, Jones to Manufacturers Hanover re depository Agreement between ManHan/PLH/Maxxam/Irving dated 10/28/85 and amended 12/2/85 with instructions to deliver stock certificates to Irving Trust for the account of PLH. Signed by Jones and Kassan.
Dec 4 Signed participation agreement between Irving and Banca Della Suizzera Italiana for a $10 million loan participation.
Irving memo, Fung to Halpin re the $10 million participation of Banca Italiana to PLH. Also, arrangements for $5 million drawn down by PL on 12/3/85.
Letters, probably from Jones, to NatWest/NCNB/Creditanstalt/Nova Scotia, enclosing executed Domestic and Eurodollar notes for their banks on PLH, and a Form U1 to be completed.
Amendment #11 of 14D-1 of 10/2/85 by PLH re 13 million shares tendered at $40, deposited by purchaser with the depository.
Irving memo from Newcomb to Jones, re: “Possible evaluation scenario: PL cutting and Welding Subsidiaries.” Estimates $210-$240 million. Rather add note at bottom of #850243.
Dec. 05 Boesky obtains from Market and Hurwitz $1,025,000 profit on PLC shares
Dec 5 Signed participation letter – Royal Bank of Scotland for $10 million.
“Sample Copy” Irving letter to Australia and NZ Banking Group,Ltd., from Newcomb (Irving) regarding the value of the cutting and welding subsidiaries, and attaching the 12/4 scenario analysis.
Irving memo, from Fung to Schwarz in Customer Loans advising that MXM Corp. is now PLH.
Irving memo from Fung to Halpin re the $10 million participation of Royal Bank of Scotland in PLH.
Irving letter, Jones to Kassan, PLH, Maxxam, advising re Royal Bank of Scotland participation, Signed by Jones and Kassan.
Irving letter, Jones to Kassan, PLH re participation of Banca Della Svizzera Italiana, signed Jones/Kassan.
Dec 9 Irving letter, Jones to Kassan, PLH re participation of NCNB of N.C.
Dec. 09 NASD letter to NYSE re Pacific Lumber trading activity in September 1985
Dec. 10 William O’Connell Pres. of US League of Saving Institutions says wider spread (cost of funds 8.71% and yield of loan portfolios 11.1%) is largely responsible for earnings growth this year.
Ronald Alghini resigns as President and CEO of Jefferies & Co., effective 1/2/86.
Dec 10 Updated list of Bank participation invitations and comments (declined, pending, etc.), interesting.
Dec 16 Kassan (Maxxam) letter to Jones (Irving) enclosing the Notice of Participation forms for the four above banks.
Dec 18 Irving memo, Fung to Bert Hall, Securities Clearance Dept., Transfer Section, re: PLH, asking him to transfer 494,900 shares of PL common “which are currently storred in your vault under the subject’s account, into the subject’s name, i.e., PL Holdings,Inc. Bank of America is the transfer agent…”
Dec. 18 Ronald A. Alghini, President & CEO of Jefferies Group and Jefferies & Co., to resign from both companies effective 1/2/86.
Dec. 19 Federated Development Profit Sharing opens new account with Jefferies & Co.,
Dec 19 Irving letter, Jones to Kassan, PLH – a Notice of Participation re Bank of Scotland, different name and address from 12/9 letter, signed Jones and Kassan.
Dec 23 Irving letter, Jones to Kassan, PLH – A Notice of Participation re Bank of New England, signed Jones and Kassan.
Irving letter, Jones to Manufacturers Hanover Trust re Depository Agreement between Man Han and Maxxam, enclosing the 12/3/85 letter of instruction from Irving to Man Han re the transfer of PL shares to ITC.
Dec 31 Irving memo, Fung to Linda Collagrande, Inst. Custody, re PLH, establishing a tax ID# for PLH
Dec 31, by the end of the year 1985
Maxxam owns 3,781,571 shs of TSG (10.3%).
Drexel’s JB market share is 56%, 73 deals for $6.7 billion; 2nd is Salomon Bros. 9 deals for $1.4 billion. Par value of junk bond defaults this year (’85) is $992mm; Junk bonds 24% of total corporate debt this year
Of First Executive’s $12 billion in assets, $5.7 billion are junk bonds
Drexel had an equity stake in 150 companies it had financed. Milken was Drexel’s largest stockholder with 6% (Forbes).
Investing in JB’s issued by other companies was part of the Milken game and not simply fortuitous when A bought B’s and B bought A’s.
USAT bought $2,027,067,000 in investment securities, earned $103,226,000. Increase in yield from investment securities is “primarily due to corporate debt”. USAT holds $363.2 million in corporate securities, only $27.5 are of investment grade. Drexel is underwriter for 37.5% of the junk bond issues and lead underwriter of 56% of the issues bought by USAT. USAT bought $289 million in junk bonds where Drexel was the sole underwriter.
USAT bought $1,386,435,000 in mortgage backed securities, earned $26,968,000. Salomon Bros. was the “counter party” to $213mm in mortgage backed securities sales to UFG. Drexel was the “counter party” to $340mm in mortgage backed securities sales to UFG
USAT holds $532,935,000 in brokered CD’s & $575,415,000 in negotiated CD’s
USAT paid a $32,687,00 dividend to UFG. This is the one and only dividend pd in UFG history.May 85?
USAT had 74 real estate projects in Texas, California, Florida and New Mexico
Branch sale of 6 of USAT’s San Antonio branches with an aggregate of $93.1mm in deposits. Buyer is Home Savings Assn.
UFC has partial sale of WRI netting $8.1mm gain reducing UFC’s portion to 19.8% from 35.4%
UFG’s Series C Convertible Pf was issued with a total of 755,000 shs for $10.2mm [SEC “official summary” Vol 51, No. 2: FDC held 47,702 directly and 688,824 shares of Series C indirectly, through MCOH.]
History of Milken-Hurwitz Relationship Part I >>