clarinews@clarinet.com (MEDE NIX) (01/17/90)
MEMPHIS, Tenn. (UPI) -- Lawyers for the Julien Co. dropped objections Tuesday to the appointment of a trustee to oversee the reorganization of the cotton merchant whose bankruptcy threw world markets into chaos. The Julien Co., the world's No. 2 cotton merchant, filed for Chapter 11 bankruptcy reorganization last week after two banks and a brokerage house sought involuntary bankruptcy for the firm. The company, owned by Julien Hohenberg, 63, apparently lost millions speculating on the New York Cotton Exchange last fall. Testimony at a hearing last week showed that Julien owes about $325 million to 11 banks and $19 million to more than 600 unsecured creditors. The company has assets of only about $160 million. Bankers Trust Co., one of the banks seeking involuntary bankruptcy, is owed the largest amount, $172 million. ``Management would not be opposed to the appointment of a trustee,'' Edward Montedonico, lawyer for the company, told a hearing Tuesday. ``We would just ask that the trustee be familiar with the cotton trade and a disinterested party.'' Montedonico said that, after consulting with members of the cotton industry over the weekend, it was decided that a trustee would be best to run the company during liquidation of its assets. ``This consent has been well considered,'' said William Norton, Hohenberg's personal lawyer. ``Because of the allegations in the filing against us and because of the impact on the employees who stayed with him, he thinks this is the best way.'' ``He feels a moral obligation to the unsecured creditors and believes that the secured creditors would not have given consent,'' Norton said. Bankers Trust last week had asked U.S. Bankruptcy Court Judge William Brown to appoint a trustee to manage the company through its bankruptcy reorganization. Bankers Trust also submitted a list of possible names for the trustee. The appointment of a trustee for the company is expected to be made in about two days, Brown said. It will be up to the trustee whether the company stays in Chapter 11 reorganization or converts to a Chapter 7 liquidation, Brown said. Bankers Trust lawyer Bob Orians said he would prefer liquidation of all assets, but in an orderly fashion. ``It is imperative that there is not just a dumping of cotton onto the market,'' said Orians, who noted some cotton merchants are concerned that speedy selloff of cotton currently frozen in warehouses and at shippers could drive the price of cotton down even further. Analysts said the Julien Co. apparently acquired contracts in the summer and early fall on the assumption that cotton prices would rise and it could sell the contracts for a profit. Instead, cotton futures declined because of larger than expected crops in the United States and the Soviet Union. A creditors committee of some of the largest unsecured creditors also will be created. Some of the largest unsecured creditors are expected to be Julien employees, who have not been paid in weeks. Also unresolved are several lawsuits filed against the company and Hohenberg. The largest was a $15.25 million suit filed by Bankers Trust alleging possible fraud and illegalities from Hohenberg's use of a $2.5 million family trust as collateral for a loan for his firm. Bankers Trust alleged Hohenberg did not have the authority to commit the trust's securities to the loan. Brown said that a stay to stop all creditors from disposing of Julien Co. assets will remain in effect at least until a trustee is appointed. Analysts said Julien's financial troubles have caused chaos in the cotton market, affecting buyers, sellers, growers, shippers, ginners and mills.