Comdisco Files for Chapter 11, Conducts Overhaul

Following four months of serious contemplation of its fiscal situation,
service provider Comdisco Inc. Monday has decided to file
for Chapter 11 bankruptcy protection for its U.S. concerns, sell its
technology service division to Hewlett-Packard Co. for $610 million, and
trim 200 jobs from its workforce.


Comdisco is known primarily as a technology leasing company, and is a go-to
alternative should disasters strike IT businesses; contingency planning and
disaster recovery are its specialties.


With regards to bankruptcy protection, Rosemont, Ill.’s Comdisco and 50 of
its domestic U.S. subsidiaries have filed for relief on a “fast-track”
basis, meaning Comdisco hopes to stop any bleeding until early 2002, when it
plans to emerge to get back on its feet. The firm, which filed its plea in
the U.S. Bankruptcy Court for the Northern District of Illinois, hopes to
sell its Availability Solutions to HP under Chapter 11, where it may resolve
short-term liquidity issues. Comdisco has also filed a motion seeking the
approval of bidding procedures to conduct a sale auction for its leasing
business units.


The deal with HP allows that Comdisco will cede its U.S. operations and the
stock of its subsidiaries in the United Kingdom, France and Canada to the
hardware giant. The agreement excludes the purchase of the stock of
subsidiaries in Germany and Spain, as well as other identified assets,
including Network Services and IT CAP Solutions. The Availability Solutions
division services more than 3,000 businesses in North America, Europe and
Asia.


The announcement does not by any means come out of the blue. The plan was
revealed four months after Chairman and Chief Executive Officer Norm Blake
arrived but not before the services and investment company announced a
second-quarter net loss of $54 million, or 35 cents per share, in May.
Comdisco’s venture unit wrote off $100 million in unpaid loans and set aside
an additional $206 million for future bad debts. Dragging it further down
was the company’s $30 million pre-tax charge to account for the decreasing
value of assets from its defunct high-speed Internet service, Prism
Communications Inc., and a $38 million charge for the shutdown of its
network consulting unit, which it closed in January.


In April, Comdisco retained Goldman, Sachs & Co. and McKinsey & Co. to
explore “options,” a giveaway that a firm may be gearing up for a sale, but
the question remained: which division? With that answer resounding
throughout HP Monday, Comdisco also announced that it has received
binding commitments for a $600 million senior secured DIP financing facility
led by Citibank, N.A., Chase Manhattan Bank, and Heller Financial Inc. and arranged by Salomon Smith Barney Inc. and J. P.
Morgan Securities Inc.


Lastly, Comdisco said it will reduce its staff by 200 positions, more than
half of which will be at the corporate level. The outfit will continue to
pay retained employees in the normal manner and their health benefits will
continue during the restructuring process.

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