Another Dogfight At Greyhound?

After 15 months in bankruptcy court, Greyhound Lines Inc. has been looking forward to the end of a rough ride. It has won key court battles with more than 5,000 striking drivers and their union. And it has dumped its top executive and managed to woo the majority of its hard-nosed creditors. Now, the nation's biggest bus company is ready to reorganize with a sleeker route system, improved customer service, and a new computer system for monitoring demand.

There's just one hitch. The vision of a spruced-up bus line has lured a suitor that could stall, or possibly kill, management's reorganization. Dallas-based Richmont Corp., an investment group that recently participated in a run at Avon Products Inc., has teamed up with a former chairman of Greyhound to put together its own buyout plan. Richmont's plan boasts at least one advantage over management's: It has the backing of Greyhound's striking drivers, who walked out in March, 1990.

LITTLE MARGIN. So far, Greyhound's weary creditors have shown little interest in welcoming the newcomers. One bondholder grouses that the Richmont offer is "just another, last-ditch attempt by the union to try and gain control of this company." Following months of talks and the ouster of Chairman Fred G. Currey, creditors say they are eager to see Greyhound back on the road. Nearly 85% voted in early August to support management's reorganization, which would give unsecured creditors $165 million in new notes and a 95% equity stake.

Greyhound's future is anything but assured. Management's plan envisions boosting profit margins on a route system cut by 20% from prestrike operations (chart). And the company still faces heavy debt and interest payments. Greyhound "will have little margin for error in its first two years or so after emergence," says Steven R. Sheldon, vice-president at Anglo-American Investor Services Corp., a bondholder.

But Richmont will press for its own chance to take the wheel. The Amalgamated Transit Union, representing Greyhound's striking drivers, is seeking a delay from the bankruptcy court so Richmont can develop an offer. If Judge Richard S. Schmidt says no, Richmont can wait to see if management's plan is confirmed on Aug. 27. If it's not, Richmont can then offer its own plan.

Richmont is no newcomer to the buyout business. An affiliate of cosmetics maker Mary Kay Corp., the group in late 1989 linked up with oil heir Gordon Getty and others in a failed bid to gain control of rival Avon. Richmont still manages Mary Kay's 3% stake in Avon. Dwight P. Smith, a spokesman for Richmont, says Avon and Greyhound share a similar appeal: great American brand names. Richmont's proposed partner in the deal, James L. Kerrigan, would bring the know-how about buses. He led Greyhound in the late `70s and later formed an investment group to buy Trailways Corp. Nearing bankruptcy in 1987, the bus line was later sold to rival Greyhound, then headed by Currey.

NO BACK PAY. For the striking drivers, a Richmont buyout could be their last chance for immediate relief. They have not had much luck so far. The union insists that it will prevail in a National Labor Relations Board case charging the company with unfair labor practices. But that litigation could drag on for years. Moreover, the bankruptcy court has pushed the union far down the list of Greyhound creditors and essentially capped its potential back-pay claim at about $31 million. It originally sought more than $125 million.

If Richmont were to succeed, the strikers figure to get all of the 3,600 drivers' jobs at the slimmed-down Greyhound. In return, the union would give up its back-pay claim. Wages would be the same as those planned by current management, which also has held settlement talks with the union. But under new Chief Executive Frank J. Schmieder, Greyhound has offered to hire strikers only as jobs become vacant.

The promise of labor peace alone won't woo creditors. Many believe management will ultimately win the NLRB case, or at least succeed in limiting the liability. James E. Spiotto, a bondholder attorney, questions whether Richmont can offer a better deal than management. Blackstone Group, a New York investment firm that considered a union-backed bid, changed its mind in part because it reckoned the struggling bus line would need too much fresh capital.

Richmont isn't revealing any details of its possible bid. But, says Smith, "We're not stupid enough to come to the table without a deal that's appealing." If Richmont can tempt creditors, Greyhound may have a few more bumpy miles to go.

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