Fruehauf Proposes Reorganization Plan

July 1, 1998
The first amended joint plan of reorganization for Fruehauf Trailer Corporation was proposed in a disclosure statement dated June 24 in the United States

The first amended joint plan of reorganization for Fruehauf Trailer Corporation was proposed in a disclosure statement dated June 24 in the United States Bankruptcy Court for the District of Delaware. Fruehauf and its affiliated companies entered Chapter 11 bankruptcy on October 7, 1996, and since then Fruehauf's major assets have been sold. The debtor is proposing a plan for the further reorganization and disposition of assets.

Fruehauf's axle plant in Delphos, Ohio, was sold at auction February 18, 1997, to Holland Hitch Company for $14,390,000 plus the value of the inventory.

Fruehauf's US manufacturing and sales distribution business was sold March 17, 1997, at an auction where Wabash National Corporation was the sole bidder. Wabash offered $19 million in cash, one million shares of Wabash common stock, and $17.6 million of par value Wabash preferred stock. This price includes $4 million bid on the day of sale to include purchase of the Fruehauf van manufacturing plant in Fort Madison, Iowa. Fruehauf has since sold 800,000 of the million shares of Wabash common stock to Merrill Lynch, Pierce Fenner & Smith for $21,232,987.

Although Holland Hitch and Wabash agreed to hire many of the Fruehauf employees, they did not agree to assignment of the approximately 40 collective bargaining agreements in connection with the purchases. The bankruptcy court approved termination of Fruehauf's collective bargaining agreements on May 29, 1997.

Fruehauf had approximately 1,800 retirees and dependents of retiree entitled to medical benefits. Fruehauf, which was self-insured for all of the benefits, continued uninterrupted payment of the benefits through April 15, 1997, the day prior to the closing of the Wabash sale. Nearly 90% of the retirees were employees of K-H Corp prior to Fruehauf's acquisition of K-H. The bankruptcy court terminated all retiree benefits on May 29, 1997.

Fruehauf has commenced an action with respect to Fruehauf Trailer Corporation Retirement Plan Number 3, alleging that an increase in pension benefits to certain non-union, long-time employees approved just three weeks before Fruehauf entered bankruptcy was a fraudulent transfer that should be voided.

Fruehauf International Limited still owns a 99.99% equity interest in Fruehauf de Mexico SA de CV, located about 45 minutes north of Mexico City. The 108,000-sq-ft plant has the capacity to build about 1,900 trailers per year on a single shift basis without overtime. The plant employs 417 and manufactured 198 trailers in January 1998, primarily for sale in Mexico. Fruehauf de Mexico estimates it has a 35% share of the Mexican market, and that its main competitors are Ramirez with a 20% share, Caytressa with 15%, and Gonzales, Rocsa, Retessa, and others with about a 5% share each. As of February 1997, Fruehauf de Mexico had assets of $13.8 million and Liabilities of $6.8 million.

Other real property owned by Fruehauf has some value but is tied up in legal proceedings or has environmental problems.

After the sale of Fruehauf's domestic sales and manufacturing business, the company canceled its lease and office space in Indianapolis and moved books and records to California near the homes of current officers.

Current Fruehauf officers and their annual compensation are: Chriss W Street, chairman, president and CEO, $270,000; James Wong, CFO and treasurer, $78,000; Worth W Frederick, vice-president, $90,000; and Courtney Watson, secretary, $65,000. When the reorganization plan is approved, these four will receive bonuses of: Street, $350,000; Frederick, $100,000; Wong, $50,000; and Watson, $50,000. They would continue working for the liquidating trust and/or for Fruehauf de Mexico after the plan is approved.

All of Fruehauf's assets are encumbered by liens in favor of the holder of senior notes worth about $58 million as of the bankruptcy filing date plus accrued interest since then. After paying other short-term borrowings, Fruehauf's assets total less than the principal amount owed to the holders of the senior notes. The senior noteholders could foreclose their liens in all of Fruehauf's assets, leaving nothing for other creditors. However, the holders of the senior notes have agreed to a plan that provides for the payment of allowed administrative, priority, and pre-petition tax claims, and for a potential distribution to general unsecured creditors.

Over $936 million of unsecured claims have been asserted against Fruehauf. The plan does not attempt to estimate the amount of unsecured claims that ultimately will be allowed. Fruehauf scheduled $49 million in unsecured claims, but unliquidated and disputed claims that ultimately may be allowed might increase the total unsecured debt above the scheduled amount.

Secured and some unsecured creditors would have voting rights to approve or reject the proposed plan. Holders of old common stock and old warrants would have no voting rights and would receive no distribution under the plan. All old common stock and old warrants would be canceled.

The unsecured creditors committee currently consists of four members: Southern Fabricators Inc, Decatur Aluminum Corp, Aluminum Co of America (ALCOA), and Goodyear Tire and Rubber Co.

Further information on the Fruehauf plan can be obtained from the website of the New York City law firm of Camhy Karlinsky & Stein LLP (http://www.camhy.com). Three documents are available: the 48-page First Amended Disclosure Statement for Fruehauf's First Amended Joint Plan of Reorganization, dated 24 June 1998; a 17-page draft of the Liquidating Trust Agreement, dated 24 June 98; and a 30-page Amended Joint Plan of Reorganization dated 24 June 98.