IRT Announces Major Restructuring, Relinquishes Headquarters to Lender

Signaling that it may soon cease to exist as an independent company, IRT Corp. said Tuesday that it may sell all or part of the company as part of a “comprehensive corporate restructuring.”

IRT also disclosed that it has turned over possession of its headquarters building off North Torrey Pines Road to lender Trust Co. of the West, apparently because of difficulties making payments on a $14.2-million mortgage held by TCW. According to IRT’s 1987 annual report, TCW had the option of converting the mortgage to possession of the building, but not until 1993 under original terms of the 1985 loan.

Another sign of IRT’s troubles came in the company’s disclosure Tuesday that until recently it was in default to its two principal lenders, Sanwa Bank California and Citicorp Investment Bank. Both banks have agreed to extend terms on the loans and to waive “all current existing (loan) covenant defaults.”

Sanwa Bank California has increased its credit line to IRT to $7.3 million from the previous $6 million through July 31. As of May 20, IRT had used $5.7 million of the credit line. Citicorp agreed to defer overdue interest payments on its unsecured $5-million note until December and, as a consideration, received a second lien for $1.25 million secured by IRT assets. IRT now owes $330,000 on the Citicorp note.

IRT, a manufacturer of radiation technology products that include robotic inspection systems, also said it has not replaced three key executives who have left the company since November. They include chief financial officer Dale Hornback, who resigned in January “for personal reasons.” Hornback’s duties have been assumed by controller James Dooley, spokeswoman Alison O’Brien said Tuesday.

O’Brien said the restructuring should not be viewed as a liquidation of corporate assets. She offered no further details on which of the company’s assets likely would be sold. IRT’s adviser in the restructuring will be Bankers Trust Co.

In exchange for the deed to the 86,000-square-foot building, TCW agreed to “extinguish” the $14.2-million mortgage debt and to give IRT free rent through the end of 1988. IRT’s lease of the building, which had a book value of $4.6 million as of March, 1987, runs through 1995.

Over the past several years, IRT has periodically been unable to generate sufficient cash from operations to pay its bills, despite efforts to cut overhead. The company has been plagued by slower-than-expected orders and cost overruns related to its sophisticated and costly CXI inspection system.

Those problems contributed to IRT’s $5.6-million loss on $25.9 million in revenue for the first nine months of the current fiscal year, and to a $576,000 loss on sales of $42.6 million in fiscal 1987. IRT’s results for the quarter and fiscal year ended March 31 will be released next month.

To remain solvent, the company has raised funds through asset sales, extended lines of credit, and a private sale of stock to board directors, including chairman Clifford Brokaw.

As of Dec. 27, IRT’s total debt of $35.6 million was nearly 10 times its shareholder equity of $3.9 million. IRT’s debt load, however, will be reduced significantly by extinguishing the TCW mortgage, O’Brien said.

To cut overhead, IRT has reduced its payroll from 400 a year ago to 340, O’Brien said. The company closed its Atlanta manufacturing plant last year and consolidated it with IRT operations in San Diego.

Other key executives who have left IRT besides Hornback include W. Dennis Swift, formerly president of the Electronic Systems Group, who resigned in November. Samuel Yeager, president of IRT’s Automation Systems Group, resigned in January.

IRT shares closed up $.125 at $2.875 in American Stock Exchange trading Tuesday.