A Medical Device Daily

Tyco International (Pembroke, Bermuda) said yesterday that it has inked a $3 billion agreement to settle the majority of the class action suits over the company's stock values as the struggling company attempts to right itself in the wake of previous mismanagement during the watch of CEO Dennis Kozlowski.

At least one bondholder, however, has indicated that it finds the offer below the contract value and will fight the offer in court.

Ed Breen, CEO and chairman of Tyco, said in a statement that the settlement would "resolve our most significant legacy legal matter." He said that the company's balance sheet and cash flow are sufficiently vigorous to "allow us to readily absorb these costs while removing much of the uncertainty" around the firm's legal problems.

Tyco, which seeks to buy back roughly $6.6 billion in dollar-denominated debt and another $1.9 billion in debt denominated as Euros and pounds, will take a charge against the offer in its current fiscal quarter.

A subsidiary of the American International Group (AIG; New York) said that it intends to sue Tyco for what it says is a below-contract price for its bonds. AIG Global Investment Group (New York) filed the suit May 9, and according to a Reuters report, Tatiana Iliczewa, an AIG representative, warned in a May 3 conference call with Tyco bondholders that Tyco's offer "has left us with no choice but to oppose the course of tender and demand the full redemption payment that is owed to us and to our clients."

Tyco in January said that it will attempt to streamline its operations by spinning off its healthcare and electronics divisions as independent companies and allow it to focus on fire, security and engineered products divisions. Among its healthcare holdings are pulse-oximeter manufacturer Nellcor (Pleasanton, California) and Mallinckrodt Imaging (Hazelwood, Missouri).

In 2005, Kozlowski, CFO Mark Swartz and Mark Belnick, then the company's chief legal officer, were convicted of securities fraud for taking out more than $170 million in loans from the company without notifying shareholders or gaining approval from the firm's compensation committee. Kozlowski and Swartz also did not disclose the sale of 7.5 million shares of Tyco stock for $430 million.

The Securities and Exchange Commission formally filed charges in September 2002.

Tyco yesterday on its web site reported that it will extend the deadline for holders of dollar-denominated shares to 5 p.m., EDT, May 17 for those wishing to receive the total consideration compensation package. After that date, the company will accept shares until May 24 for the total consideration sum minus an early consent payment of $30.

Paul Fitzhenry, Tyco's media relations representative, told Medical Device Daily that AIGGIG had withdrawn a temporary restraining order against Tyco on Monday, and that he was unsure concerning the current legal status of the conflict.

He also said that he does not know if other bondholders intend to join the suit. "There's a law firm representing that group, and AIG is the most visible party in that area," he said.

At press time, AIGGIG had not responded to calls for comment.

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