Frontier's Future Still Uncertain
By John Emerson
ROCK HILL July 25, 2000 As Frontier Insurance stock continues to trade on the New York Stock Exchange at less than a dollar a share, people are wondering aloud if the company will be able to continue in business and if so, for how much longer.
At this point, I would have to say that there is almost total neglect of the company by mainstream Wall Street companies, said Lloyd Barriger, a Monticello-based stock broker in the firm Barriger and Barriger. At one time, many of the major brokerage houses Salomon, Smith-Barney, Merrill Lynch and several others had a line on it. Now theyve all dropped it because it doesnt pay them to keep up with it.
This neglect is not something that bodes well for the troubled company as it struggles to right itself and move forward. Richard Seyffarth, vice-president for investor relations, says, however, that the company is in the process of turning itself around.
Since late March and early April, the company has sold several subsidiaries in an attempt to raise cash to pay down debt, Seyffarth said. The idea behind the assets sale is to reduce the size of the company and bring it into line.
At this point, there is no large debt that we dont think we can handle, he said. The debt that we have with our banks is not due for several years, and we hope by then we can pay most of it down.
One rumor that has consistently made its way around the financial circles of the county is the imminent delisting of the companys stock on the New York Stock Exchange. One of the continuing requirements that NYSE has for stocks listed is that they cannot trade for less than $1 per share for more than 30 days. Such an event is cause for dropping the stock from its listings.
Yesterday, the stock was trading at $0.6875 per share and has not been over $1 for several weeks.
One thing I can tell you is that we are not in imminent danger of being delisted, Seyffarth said. They dont make an immediate decision to delist, and they give you a chance to remedy the situation. One thing that we could do to bring the price of the stock up is a reverse split, where we take in two shares and issue one. Its not something we are considering at the moment, but it could be done. When they review us again in six months, we hope that the stock is trading at more than a dollar so we wont have to consider something like a reverse split.
One of the major things that put the company in a financial tailspin was the need to increase reserves, the money set aside to pay insurance claims, by almost $300 million over the last two years. Seyffarth said the companys reserves are now adequate for the amount of business they are doing.
As long as we make the interest payments on our debt, I think we can keep going for some time, he said. What were doing is not easy, and obviously were going to be operating on a smaller scale, but I think were going to be able to stay in business.