The Other Mess: Lenz Vs. Kidder

Randolph W. Lenz, chairman of Fruehauf Trailer Corp. and Terex Corp., its parent, is in a nasty legal battle with Kidder, Peabody & Co. that could threaten his control of Terex.

Lenz, who owns 52% of Terex, has used 1.3 million of his 5 million Terex shares as collateral for three margin accounts at the brokerage. Terex stock has suffered badly this year, partly because of losses at Fruehauf. Other bad news for Terex was a BUSINESS WEEK story in October that raised questions about its accounting practices.

Later that month, according to court papers, Kidder told Lenz his stock had dropped so far that he was in default of its margin requirements. The firm ordered him to repay $6.5 million in loans against his accounts. When Lenz replied he didn't have enough cash, Kidder threatened to sell his Terex shares, according to documents filed in New York State Supreme Court.

To stop the sale, Lenz requested a temporary restraining order, which the New York judge granted. A hearing on the matter will be held sometime next year. Lenz claims he's not in default on the accounts. A forced Terex sale, he argued in an affidavit, "would inflict devastating financial harm on public shareholders, the company, and me" by driving the price down. It would also cut his holding to below 50%.

That could put Terex in a bind. Some of its loan agreements require Lenz to maintain a majority stake. Dipping below this could force Terex to redeem millions of dollars in debt, which it could ill afford. As if Lenz didn't have enough to worry about.

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