Motion Picture Daily (Oct-Dec 1936)

MOTION PICTURE DAILY Almost Four Years It is four years, less two months and a couple of days, since RKO consented to a receivership in equity in the Federal Court for the Southern District of New York. The company's application was filed on Jan. 27, 1933, but was preceded by three steps leading to the major move. On Jan. 23 of that year, Alfred West, presumably acting on his own, but subsequently established to be an employe of Bancamerica-Blair Corp. by Motion Picture Daily, filed for a receivership in the Federal Court for the Southern District. The following day, stockholders sought similar action in Baltimore and in Newark. Three days later, the parent company filed its voluntary petition. At no time, were subsidiary corporations, such as RKO Radio Pictures, RKO Export, RKO Distributing and RKO Studios affected. Following the passage of Section 77B as an amendment to the Federal bankruptcy law the receivership was changed to a trusteeship to permit reorganization under the terms of the amendment. 8 RKO Plan Is Presented to Judge Bondy (Continued from pane 1) outstanding in the amount of $750,000 and held by Bank of America National Ass'n will be paid off in cash which the plan proposes to raise by the sale of a sufficient amount of new common shares to provide $1,600,000 for this and other financing needs. Unsecured general creditors, other than Rockefeller Center, are offered three-quarters of a share of $100 par preferred stock and one and one-half shares of common stock for each $100 of claims. The plan estimates that claims in this classification will not exceed $8,000,000 when finally determined. Provision for Present Holders Holders of common stock outstanding in the amount of 2,577,554^4 shares are offered one-half share of new common for each share of old. The part-paid RKO certificates, which represent a subscription to a "package" of old debentures and common stock are entitled to receive such proportion of the new securities which subscribers would have been entitled to receive if their certificates had been fully paid as their payments made bear to their full subscriptions. Subscribers, hovewer, may complete the full payments required under the "package" agreement, provided they do so within 20 days after confirmation of the plan. As of Sept. 26 last, approximately $249,079 remained to be paid by subscribers to complete full payments on the debentures and stock included in the subscriptions. The plan estimates that allowed claims affected by the plan will not aggregate more than $30,000,000 and states that the plan is not to.be made operative in the event that claims, exclusive of the Rockefeller Center claim and others for contingent or indeterminate amounts, exceed $22,000,000. This is taken as evidence that the reorganizers estimate that the settlement of the $9,100,000 Rockefeller Center claim represents in amount approximately $6,000,000. Center Claim Separated The Rockefeller Center claim, based on breach of the 20-year RKO leases on the Music Hall and Center plus certain alleged damages involving the costs of construction of the two the atres, is treated apart from other unsecured creditors' claims. The settlement provides for a new 12-year agreement with Rockefeller Center on the Music Hall and Center and office space in the RKO Bldg. at reduced rentals and for the issuance to Rockefeller Center of 500,000 shares of new RKO common stock, no par value. Office Rental Reduced In return, the $9,150,000 claim is canceled and RKO again participates in the operation and profits of the two Radio City theatres. RKO is to have three representatives on a committee of seven which will have the operating direction of the theatres for the 12-year period. Rockefeller Center will name the other four. The rental rate for office space is $2 per square foot, representing a reduction from the original rate of $2.75 per sq. foot. RKO will receive a $25,000 annual fee for consultant and advisory services in connection with operation of the two theatres and will participate in the earnings under certain conditions. Rockefeller Center is to receive the first $700,000 of surplus earnings of the Music Hall and three-quarters of the next $100,000, with RKO receiving the other quarter. The remaining surplus earnings are to be divided equally between the two. If surplus earnings of the Hall are less than $700,000 in any year, the deficiency is to be made up to Rockefeller Center out of any surplus earnings in excess of $60,000 of the Center Theatre for that year. The first $60,000 of annual surplus earnings of the Center go to the Rockefeller company and the next $100,000 is divided three-quarters to Rockefeller Center and one-quarter to RKO. Any remainder is divided equally, and, in the event the initial $60,000 surplus is not realized, the defiency is to be made up out of any surplus in excess of $700,000 earned by the Music Hall. If the Center is operated on a picture or combination policy, however, RKO may take over the theatre in whole or in part, but if RKO does not do so earnings after the first $60,000 surplus are to be divided equally. Stipulation on Surplus Earnings An interesting clause in the agree 1 ment provides that RKO is to receive all surplus earnings of the two theatres in excess of $91,000 for the year 1937 in the event that the average market price of the new RKO common equals or exceeds $18.30 a share for any 10-day period between the time of the confirmation of the reorganization plan and Jan. 1, 1938. RKO assumes no obligation in respect to the operating costs of the houses or their losses. The agreements may be terminated in the event of an RKO or RKO Radio Pictures bankruptcy or a receivership extending for more than 30 days, or in the event RKO earnings for three successive years are insufficient to pay the company's interest requirements on its outstanding obligations. The plan was filed by Hamilton C. Rickaby of the firm of Simpson, Thacher & Bartlett, attorneys for Atlas Corp. Atlas an RKO Board Factor The new board of directors of RKO will consist of a minimum of nine members, who will be named later subject to the approval of the U. S. District Court here, the company's reorganization plan states. The first board will hold office for two years. The Atlas Corp. looms as the dominating factor on the board. It will receive an estimated 75,000 shares of common stock in connection with the exchange provided for holders of old RKO debentures, probably a like amount in exchange for its holdings of old common, will receive a large block for its services as reorganization manager, will underwrite a $1,600,000 sale of additional new common and undoubtedly will receive an appreciable number of option warrants. In addition. Atlas, with Lehman Bros., holds an option to acquire the approximately $5,000,000 balance of RCA's holdings in RKO. Lehman participated with Atlas in the purchase of the first half of the RCA holdings and in consequence is also an important factor in the new RKO. RCA's interest will be a vital one until and if the option on its holdings is exercised. Rockefeller Center, which receives 500,000 shares of the new common m the settlement of its RKO claim, will also be a factor on the board for the time being. Indications are, however, that this company's holdings will be liquidated at the first favorable market opportunity. Delay Hearing to Dec. 22 Hearing on the RKO trustee's motion to pay off an outstanding $725,000 of the company's secured gold notes, held by Bank of America National Ass'n, was postponed by Federal Judge William Bondy yesterdav to Dec. 23 on the petition of Atlas Corp. The company's reorganization plan Tuesday, November 24, 1936 provides for the payment of the notes out of new capital to be raised by the sale of RKO stock, rather than out of cash on hand, as proposed by the trustees. Judge Bondy also granted leave to an independent unsecured RKO creditors' committee, representing about $1,500,000 in claims, to intervene in the reorganization proceedings. The committee is represented by Carlos Israels of the law firm of White & Case. Plan No Theatre Leases No issues are to be made by RKO on the Music Hall and Center under the company's reorganization plan. RKO's participation in the operation and earnings of the theatres is to be based upon a 12-3rear agreement which relieves RKO of all liability for operating costs and possible losses. RKO to Simplify Corporate Setup (Continued from page 1) Depinet is president of this subsidiary and indications are he will become a vice-president of the parent company under the new arrangement. All of the RKO Pathe subsidiaries, acquired in the 1931 purchase by RKO of Pathe assets for approximately $5,000,000, are also slated to go out of existence through the mersrer route. These companies include RKO Pathe Pictures, Inc., RKO Pathe Distributing Corp., RKO Pathe Export Corp.. and RKO Pathe Studios Corp., Ltd. Also to be merged are RKO Studios. Inc., and RKO Export Corp. Although the plan does not propose the formation of a new parent company it makes provision for such an eventuality should it be decided later to organize a new company. It states that "the Debtor (RKO) may be merged in or consolidated with a new company to be organized under the laws of Delaware." It is assumed, however, that should such a new company be organized the RKO name would be retained. Bids Total $21,235 For Empire Assets Assets of Empire Laboratories, sold bv auction in West New York, N. L. brought a total of $21,235.05. The sale, by lots, followed the refusal by the sellers of an $11,000 bid for the entire offering in bulk at the opening of the sale. Principal buyers, most of whom purchased picture negatives, were : E. H. Goldstein of Republic, Jack Goldberg, Phil Lewis, Harry Kosch, Guaranteed Pictures, Samuel Cummings, Joe Seiden, Robert Block, Batti Stoni and Adolph Friedman, auctioneer of Newark. 175 Theatres RKO theatre expansion reached its peak in 1930 when 175 theatres were controlled and operated directly by its subsidiaries, the company's reorganization plan sets forth. At present its theatre interests have been reduced to approximately 100 houses. $1,446,922 Net Consolidated net earnings of RKO for the first 39 weeks of this year, ending Sept. 26, last, were $1,446,922, it is stated in the company's plan of reorganization. The figure is after payment of interest on the secured notes and old debentures and after normal taxes, but without provision for possible surplus tax on undistributed Drofits. Net earnings of RKO for the entire year of 1935. after interest on the old debentures, was $684,732.