In a move that was anticipated by all parties, U.S. District Judge
Roderick McKelvie ordered the appointment of a trustee for bankrupt
Marvel Entertainment. This appointment was encouraged by the secured
creditors, led by Chase Manhattan Bank, and opposed by current Marvel
stockholders, led by financier Carl Icahn. The trustee will be assuming
responsibility for all of Marvel's operations on Tuesday, December
16th. Effective that date, the current Marvel Board of Directors will
be dissolved. It has been reported, however, that the existing Marvel
management team will stay in place at least until the trustee has the
opportunity to evaluate the situation.
The effect of this change is to greatly weaken the position of the
existing Marvel stockholders, and to strengthen the position of the
secured creditors. Essentially, the stockholders are now in the
unfortunate position of potentially having their entire investment
wiped out. This may explain why Marvel's stock hit an all-time low
of $1 per share during the past week. Meanwhile, the secured creditors
are now in the position of having a neutral party in control of Marvel.
They wished for this to occur because they believed that Icahn's team
was hindering their ability to maximize recovery of the $812 million
dollars owed to them by Marvel.
One issue that was not addressed by the Court was the case of the
opposing reorganization plans offered by the Icahn group, and Toy Biz,
Inc. Nor was there any ruling on the allegations of mismanagement and
fraud raised by Icahn in a flurry of recent lawsuits against Toy Biz,
Inc., Toy Biz controlling stockholders Avi Arad and Issac Perlmutter,Chase
Manhattan Bank, and former Marvel owner Ronald Perelman. It was
interesting to note, however, that an attorney representing Perelman
was reported to be present at today's hearing.
One line of reasoning that has been put forth in analyzing the current
situation is that Perelman may have just closed the trap on Icahn. Earlier
this year Icahn wrested control of Marvel from Perelman by purchasing bonds
issued by Perelman that had his 80% stock ownership as collateral. Those
bonds went in to default when Marvel could no longer spin off enough cash
to Perelman for him to make interest payments on the bonds. Icahn
purchased the approximately $800 million in bonds at the steeply-discounted
price of approximately $200 million, and then demanded that Perelman turn
over the 80% of Marvel's stock that collateralized the bonds. After a bitter
court battle, Perelman was forced to give Icahn his stock.
Icahn now finds himself in the position of losing control of Marvel, and
potentially having his entire investment, and the investments of his
associates, wiped out. Ronald Perelman, on the other hand, could regain
control of Marvel by offering a superior reorganization plan to the new
trustee. This assumes, however, that Perelman can exceed the amounts being
offered in the present reorganization plans being offered by Toy Biz, Icahn,
and any other potential rival plans.
The only hearing now scheduled is for January 30th, at which time Judge
McKelvie will rule on the merits of the Toy Biz plan. This leaves plenty of
time, however, for other plans to be formulated, and it is anticipated that
other bidders will step forth to try and buy Marvel. The next two months
should be very interesting...