The Wall Street Journal-20080118-Ampex Weighs Bankruptcy Protection
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Ampex Weighs Bankruptcy Protection
Audio-video recording company Ampex Corp., which is scheduled to receive a Grammy next month for its contributions to the recording industry, said it may be forced to file for bankruptcy protection before it can pick up its award.
The Redwood City, Calif., company, whose innovations in the past 60 years include the development of the audio tape recorder and the invention of slow-motion instant replay, said investment firm Hillside Capital Inc. is demanding the company pay it $2.7 million by the end of the month.
Ampex said in a statement Wednesday a standstill agreement with Hillside ended Monday after negotiations with a New York private- investment firm to restructure its debt fell apart. Ampex owes Hillside Capital $48.7 million under notes issued by the company to fund its pension liabilities. Hillside is due $6.5 million principal and interest payment under the notes in 2008.
Ampex shares fell $1.16, or 36%, to $2.10 in 4 p.m. composite trading yesterday on the Nasdaq Stock Market.
Hillside Capital said it had no comment. Ampex couldn't be reached for further comment.
Hillside and Ampex have been wrangling over a restructuring of the company's debt since July. That is when Hillside issued a notice alleging the company was in default of a 1994 agreement to fund the pension liabilities. Ampex disputed the allegation.
The deal stems from a soured $479 million buyout of Ampex by a New York investment firm in 1987. One of the principals of the investment firm was John Irwin III, who is managing director of Hillside Capital. Several years after the buyout, Ampex's corporate parent filed for bankruptcy, leaving the company's pension plan underfunded by some $85 million.
As part of that bankruptcy restructuring, Hillside agreed to a deal with the Pension Benefit Guaranty Corp., the federally chartered private-pension insurer, where Ampex would issue issue notes, owned by Hillside, to help fund its underfunded pension plan.
Under the terms of the PBGC agreement, the company and Hillside are each liable to the PBGC to fund the required contributions under the plans.
Founded in 1944, Ampex's first audio recorder made its debut in 1948 when it was used to record "The Bing Crosby Show." In the 1950s the company unveiled the first multi-track audio and first practical videotape recorders.
The company later switched to digital storage systems as computer technology transformed the audio and video industries. In 1995, Ampex sold its tape business to Quantegy Inc., now known as Quantegy Recording Solutions.
Ampex is scheduled to receive a technical Grammy, which recognizes "contributions of outstanding technical significance to the recording field," at the Grammy Awards ceremony scheduled for Feb. 10 in Los Angeles.
