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Green Mountain’s Plunge Forces Chairman to Sell Shares

Robert P. Stiller, chairman and founder of Green Mountain Coffee Roasters Inc., disclosed the sale of more than one-third of his company stake, some of which was pledged to cover margin accounts and as loan collateral.

About $125.5 million of Stiller’s Green Mountain stock was sold May 7 to meet margin requirements after the shares tumbled last week, according to a filing with the U.S. Securities and Exchange Commission today. Waterbury, Vermont-based Green Mountain on May 2 reported revenue that trailed analysts’ estimates, sending the shares down 48 percent the next day.

The sale brings Stiller’s stake down to about 8.39 million shares, making him the fifth-largest holder, from 13.4 million as of March 27, according to data compiled by Bloomberg. Stiller, who was chief executive officer of Green Mountain from 1981 until May 2007, has put about 12.5 million of his Green Mountain shares into margin accounts or pledged them as collateral for at least one loan, according to the company’s latest proxy statement.

“When someone has most of their wealth tied to a company stock, that’s their legal currency, that’s their safety net,” said Rick Munarriz, a Miami-based analyst at the Motley Fool.

Stiller sold the shares through Deutsche Bank AG and it wasn’t clear from the filing if he has a brokerage account with the bank.

In general, executives take out loans backed by their stock as a way of obtaining funds without actually selling their shares. Loans are preferable to selling shares, which generate taxable capital gains and can look bad to investors.

If the shares decline in value, lenders will issue a margin call in which the executives must either pay down the loans or provide more collateral. If they fail to do so, the banks seek to recover their loans by selling some of the stock pledged as collateral in the open market.

‘Worst’ Time

“A margin call is a legitimate reason to sell,” Munarriz said. Still, “it’s the worst possible time” because the share price is so low.

Green Mountain rose 8.6 percent to $26.38 at the close in New York. The shares have dropped 41 percent this year.

Suzanne DuLong, a Green Mountain spokeswoman, didn’t immediately return a phone call and e-mail seeking comment.

In May 2003, Stiller used 1.1 million of his Green Mountain shares, adjusted for stock splits, to secure a loan from General Electric Capital Corp., according to filings with the Corporations Division of the Vermont Secretary of State.

In February 2011, Stiller pledged “any and all stocks, securities and bonds of any kind whatsoever” that were held in an account with the brokerage Merrill Lynch & Co. to Banc of America Leasing & Capital LLC, according to another state filing. The document didn’t say whether Stiller’s Green Mountain shares were held in this account.

ElanAir Agreement

This followed an August 2005 loan agreement with Banc of America Leasing that Stiller had secured with assets tied to ElanAir Inc., including Cessna aircraft and flight equipment. Stiller held a 50 percent stake in ElanAir prior to September 2002, when he acquired the other 50 percent, according to SEC filings.

ElanAir, a South Burlington, Vermont-based company that operates under the name Heritage Aviation, provides travel services to Green Mountain employees, an arrangement that is reviewed and approved by the audit committee for Green Mountain’s board, SEC filings show. According to its most recent proxy statement, Green Mountain was billed $700,000 for travel services provided by the charter arm of Heritage during fiscal 2011, up from $400,000 the year before.

Stiller sold $66.3 million of his stake in the company earlier this year before Starbucks Corp. (SBUX) announced a coffee brewer that will compete with Green Mountain’s Keurig machine. He is the second-biggest shareholder of Krispy Kreme Doughnuts Inc. (KKD) and the largest investor in pizza chain Noble Romans Inc. (NROM), according to data compiled by Bloomberg.

To contact the reporters on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net; Miles Weiss in Washington at mweiss@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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