Shareholder seeks new Pegasus reorganization plan

Friday, Aug. 21, 1998 | 11:11 a.m.

In a petition filed in U.S. Bankruptcy Court, Louis Bay of Sparks said the court should direct the mining company to pay shareholders some equity as it reorganizes under Chapter 11 bankruptcy laws.

Pegasus stock would be worthless if its restructuring is approved. The reorganization plan calls for the authority to issue 100 million shares of the new company's stock.

"What they are doing is illegal," said Bay, who purchased 4,000 shares of common stock last year for more than $22,000. "Their best bet is to bring us back in the household."

Bay said he would file a class-action lawsuit on behalf of 13,000 Pegasus shareholders if the court rejects his request.

The restructuring plan was approved by the company's board of directors, but must be approved by the bankruptcy court. A hearing is scheduled Tuesday. Pegasus spokesman John Pearson said mounting debt leaves the company little choice.

"Our discrepancy between assets and liabilities more or less tells the whole story," he said.

Spokane, Wash.-based Pegasus reported total liabilities of $332.7 million with total assets of $156.5 million through the second quarter ending June 30.

Citing low gold prices, Pegasus filed bankruptcy Jan. 16 in an effort to reorganize.

The company's reorganization plan, filed last month, calls for a new corporation with three operating mines: Florida Canyon near Lovelock, Nev.; Montana Tunnels south of Helena, Mont.; and Diamond Hill near Townsend, Mont.

The company also plans to keep its international exploration arm, Pegasus Gold International, but intends to liquidate its remaining properties.