BOCA RATON, Fla. -- Struggling appliance maker Sunbeam Corp., which owns brands such as Mr. Coffee coffee makers, First Alert smoke alarms and Coleman outdoor gear, said Tuesday it plans to file for Chapter 11 bankruptcy protection so it can reorganize the company's operations.

Chairman and Chief Executive Jerry Levin said the filing expected in the U.S. Bankruptcy Court in the Southern District of New York would enable Sunbeam to keep its business "running normally while we put our financial house in order."

He said Sunbeam hopes to emerge from the bankruptcy proceedings in six to nine months as a "stronger, more competitive company."

"This was a difficult, but absolutely necessary decision for us to make. It is, in fact, the only option that will free Sunbeam from its overwhelming burden of debt and securities-related litigation expenses," Levin said.

The company said it had the support of secured creditors and its banks for its efforts to reorganize its debt, and that it expects to pay its vendors and employees as normal during the bankruptcy process.

It said its reorganization plan would be to convert a substantial portion of the existing bank debt into term debt, convertible debt and equity interests in the reorganized Sunbeam.

It expects to discharge its securities-related litigation and bondholder debt as part of the Chapter 11 process.

Levin said the company's banks have agreed to support the reorganization plan by providing a new $285 million credit line to fund normal operations. The company also has received a commitment from GE Capital Corp. for $200 million in new financing.

Sunbeam has blamed its recent poor performance on customers no longer buying generators and outdoor equipment in preparation for possible Y2K power outages, but the company was suffering before 2000.

It lost $299.5 million on sales of $2.4 billion in 1999.

Last month, the New York Stock Exchange threatened to delist the company's shares, saying Sunbeam did not meet the standards for minimum market capitalization, shareholder equity or average closing share price required to remain listed.

Sunbeam Plans to Reorganize

American Alliance seeks a declaration that it is not required to provide $10 million of directors and officers liability coverage to Sunbeam because Sunbeam falsely disclosed that it knew of no basis for any claims when, in fact, a number of shareholder suits were imminent, and also because Sunbeam failed to provide disclosures requested by the insurer regarding its Year 2000 compliance status. The lawsuit does not specifically state that the shareholder suits involve any Y2K-related issues or that Sunbeam has otherwise been notified of any Year 2000 claims. Implicit in the suit’s allegations, however, is the concept that full disclosure of a business’ Y2K status is highly material to the underwriting process.

INSURANCE COVERAGE DISPUTES

-- Anonymous, February 08, 2001