November 10, 1999
Arizona foundation files
Chapter 11, reveals reorganization plan
___PHOENIX, Ariz.--The troubled Baptist Foundation of Arizona announced plans for restructuring Nov. 5 under Chapter 11 of the federal bankruptcy code.
___If approved by the bankruptcy court, the plan would give investors two options. The first, a "cash-out" option, would pay 20 cents on the dollar for all principal and interest due the investor. Total payout to investors in this option would be set at $40 million.
___The second option would allow investors to convert their holdings in the Baptist Foundation of Arizona to shares of preferred stock in a new publicly held company to be created as a successor to the foundation.
___This option could recover for investors 40 percent to 50 percent of their previous holdings with the foundation, according to a news release from the foundation. Shares in the new company are projected to pay dividends of 6 percent per year, the release also said.
___The new company, which has not been given a name, would consolidate holdings of the Baptist Foundation of Arizona and its many subsidiaries into one for-profit corproration and eight subsidiaries, the release said.
___Three trustees to be appointed by the foundation's investor committee and restructuring committee would govern creation of the new company and would be charged with electing a new board of directors.
___Although the Baptist Foundation of Arizona has been an agency of the Arizona Southern Baptist Convention, the news release made no mention of the state Baptist convention and did not identify any relationship between the new company and any denominational entity.
___However, the release did say a new non-profit Baptist charitable organization will be established after restructuring. This new charitable organization "will be expressly prohibited from selling debt securities," the release said.
___The Baptist Foundation of Arizona years ago departed from the traditional role of a state Baptist foundation and began aggressively selling investment instruments to individuals and churches. No other state Baptist foundation offers similar services; most simply manage investments such as endowment funds for the various churches and Baptist agencies they serve.
___Assets of the Arizona foundation have been frozen since August, when the Arizona Corporation Commission issued a cease-and-desist order against the foundation as part of a wide-ranging investigation. The foundation's three top executives since have been terminated, and the foundation has dismissed its previous legal counsel and accounting firm.
___The foundation's latest news release says the agency's problems were caused by three factors:
___Investments that were not generating sufficient cash flow to meet short-term obligations.
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___William Crews, chairman of the investor committee, called the two proposed options for investors the best possible scenario. "Liquidation of BFA and its assets would be extremely harmful to all investors," he said.
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