Tyco Shares Surge On Disposal Progress

by Mike Godfrey, Tax-News.com, New York

14 June 2002

Shares of Bermuda-based Tyco International Ltd rebounded strongly on the New York exchange on Thursday after the company received approval to shed its lending unit CIT and announced plans to streamline operations, although the company said it expected to report write-downs of $1 billion to $1.5 billion after the IPO of CIT is completed.

Tyco said it expects to realize proceeds of $5.18 billion on the sale of CIT, and will use the cash to reduce its $27 billion of debt. Tyco had hoped to complete the deal by the end of June, but said recently that it could be delayed a week.

Tyco shares were up $3.33, or 33%, to $13.48 in afternoon trading on the New York Stock Exchange. They have fallen precipitously from as high as $60 during the company's travails over the past months, culminating in the resignation of its leader Dennis Kozlowski last week after he was indicted on sales tax fraud charges in New York, and the dismissal of general counsel, Mark A. Belnick, after a clash with David Boies, an outside lawyer who is leading Tyco's internal investigation into alleged misuse of corporate funds.

The Manhattan District Attorney's office last week charged Mr. Kozlowski with evading more than $1 million in state sales taxes on the purchase of $13 million of paintings, although he pleaded not guilty at a court appearance on Tuesday. Kozlowski was said to have made purchases of artworks using money advanced by the company to buy stock options. The indictment has been followed by allegations that Kozlowski was also secretly using company funds to buy real estate for his personal use and that a Tyco director secretly sold real estate to the company.

On Wednesday, Tyco confirmed that the SEC was beginning a formal investigation regarding Mr. Kozlowski and other issues, to which Tyco responded that it would fully cooperate and was conducting its own internal investigation. The company plans to discuss these recent events at a conference call Friday.

Meanwhile, Tyco announced plans for cost savings, including the streamlining of bloated corporate operations through consolidation of headquarters in Exeter, N.H., New York City and Europe, saving about $125 million a year. The company is also getting rid of all of its aircraft. Tyco's London corporate office will be merged with other existing Tyco operations in the United Kingdom and its Luxembourg corporate office will be moved to a more cost-effective location

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