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RECONSTRUCTION FINANCE CORPORATION
Washington
October 2 k , 19^9
B a r l e y H i s e , Chairman, R e c o n s t r u c t i o n Finance C o r p o r a t i o n today announced
t h a t the D i r e c t o r s had approved a l o a n o f $10,000,000 t o K a i s e r - F r a z e r Sales
C o r p o r a t i o n , a s u b s i d i a r y o f K a i s e r - F r a z e r C o r p o r a t i o n , W i l l o w Run, Michigan.
The l o a n w i l l be used as a r e v o l v i n g c r e d i t t o a s s i s t i n f i n a n c i n g a t wholesale
l e v e l the d i s t r i b u t i o n o f automobiles manufactured by K a i s e r - F r a z e r C o r p o r a t i o n
t o dealers and d i s t r i b u t o r s t o t h e e x t e n t t h a t c r e d i t f o r such purposes i s not
a v a i l a b l e through normal channels. No p a r t o f t h e proceeds o f the l o a n may be
used i n connection w i t h the f i n a n c i n g o f r e t a i l s a l e s . Repayment o f funds
disbursed under the a u t h o r i z a t i o n i s r e q u i r e d i n e i g h t e e n months and t h e l o a n
i s t o be secured by new K a i s e r - F r a z e r automobiles; endorsement o f the d e a l e r s ;
and, the guaranty o f K a i s e r - F r a z e r C o r p o r a t i o n .
I n commenting on t h e $34,400,000 l o a n r e c e n t l y a u t h o r i z e d t o K a i s e r - F r a z e r
C o r p o r a t i o n , which w i l l mature i n t e n y e a r s , Mr. Hise s a i d t h a t t h e c o l l a t e r a l
t o t h a t l o a n w i l l c o n s i s t o f a f i r s t l i e n on a l l o f the p h y s i c a l assets o f
K a i s e r - F r a z e r C o r p o r a t i o n and i t s s u b s i d i a r i e s , i n c l u d i n g t h e l a n d , b u i l d i n g s ,
machinery and equipment known as t h e W i l l o w Run p l a n t . These p r o p e r t i e s were
r e c e n t l y appraised by Coverdale 8 C o l p i t t s , C o n s u l t i n g Engineers, 120 W a l l S t r e e t ,
s
New York C i t y , a t a recovery value as a going concern o f more t h a n $58,000,000.
The l o a n w i l l be f u r t h e r secured b y a pledge o f a l l o f the c a p i t a l stock o f
K a i s e r - F r a z e r P a r t s C o r p o r a t i o n ; K a i s e r - F r a z e r Sales C o r p o r a t i o n ; K a i s e r - F r a z e r
Export C o r p o r a t i o n ; K a i s e r - F r a z e r Canada, L i m i t e d , a l l w h o l l y owned s u b s i d i a r i e s
o f K a i s e r - F r a z e r C o r p o r a t i o n . Of t h e l o a n proceeds $22,400,000 w i l l be used f o r
e n g i n e e r i n g , d e s i g n i n g and r e t o o l i n g i n connection w i t h t h e p r o d u c t i o n o f new car
models and the balance o f approximately $12,000,000 i s f o r working c a p i t a l .
The $34,400,000 l o a n i s t o be a d d i t i o n a l l y secured by a $15,000,000 guaranty
o f Henry J . K a i s e r Company and K a i s e r Engineers, I n c » , and such guaranty w i l l be
secured b y c o l l a t e r a l acceptable t o RFC w i t h a market value o f n o t l e s s t h a n
$10,000,000. T h i s guaranty i s t o be a p p l i c a b l e a l s o t o the $10,000,000 l o a n
a u t h o r i z e d t o K a i s e r - F r a z e r Sales C o r p o r a t i o n . B o t h o f t h e loans bear i n t e r e s t
a t t h e r a t e o f f o u r per cent per annum.
Henry K a i s e r , t h e members o f h i s f a m i l y and companies i n which t h e y are i n t e r e s t e d
own l e s s than t e n per cent o f t h e stock o f K a i s e r - F r a z e r C o r p o r a t i o n which i s
b r o a d l y d i s t r i b u t e d , b e i n g h e l d by approximately 40,000 s t o c k h o l d e r s . The
widespread p u b l i c i n t e r e s t i n t h e o p e r a t i o n s o f t h i s business i s evidenced b y
t h e f a c t t h a t K a i s e r - F r a z e r C o r p o r a t i o n d i r e c t l y employs approximately 10,000
persons and i t i s estimated t h a t an a d d i t i o n a l 47,000 persons are employed by more
t h a n 1,000 s m a l l manufacturers which supply p a r t s and m a t e r i a l s and by dealers and
d i s t r i b u t o r s o f K a i s e r - F r a z e r automobiles and automobile a c c e s s o r i e s .




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October 25, 19^9
Honorable J.W. F u l b r i g h t
Chairman, RFC Subcommittee o f the
Banking and Currency Committee
U n i t e d States Senate
Washington, D.C.
Dear Senator F u l b r i g h t :
This l e t t e r r e p l i e s t o your i n q u i r y o f October 11 r e g a r d i n g the approval by
R e c o n s t r u c t i o n Finance C o r p o r a t i o n on October 6 , 19^9, ot a l o a n t o K a i s e r Frazer C o r p o r a t i o n o f W i l l o w Run, Michigan.
The amount of the l o a n i s $3^,^00,000 and t h e proceeds w i l l be used as f o l l o w s :
1 - Engineering and d e s i g n i n g o f new models and r e t o o l i n g
f o r production thereof

$18,000,000

2 - Engineering and d e s i g n i n g o f a new model l i g h t - w e i g h t
automobile, and t o o l i n g f o r p r o d u c t i o n t h e r e o f . .

k,k00,000

3 - Working c a p i t a l

12,000,000

K a i s e r - F r a z e r has been unsuccessful i n i t s attempts t o o b t a i n , through normal
banking channels o r o t h e r p r i v a t e sources, t h e f i n a n c i n g needed f o r the p r o d u c t i o n o f new c o m p e t i t i v e models - hence, i t s a p p l i c a t i o n t o t h i s C o r p o r a t i o n
f o r f i n a n c i a l a s s i s t a n c e . The Company, which h e r e t o f o r e has made and marketed
o n l y one b a s i c c a r , namely, a i»--door sedan, has determined t h a t t o compete i n
t h e automobile market K a i s e r - F r a z e r must manufacture a complete l i n e o f c a r s .
P r e s e n t l y , K a i s e r - F r a z e r has approximately $35,000,000 working c a p i t a l , o f which
approximately $12,000,000 i s i n cash. I t owes the banks $16,000,000. I n the
course o f normal operations d u r i n g the next few months, i t should r e a l i z e
s u f f i c i e n t a d d i t i o n a l cash from conversion o f raw m a t e r i a l s and sale o f f i n i s h e d
products t o enable i t t o repay i t s bank loans w i t h o u t u s i n g any p a r t o f the
proceeds o f the RFC l o a n . However, K a i s e r - F r a z e r cannot, as a p r a c t i c a l m a t t e r ,
w a i t f o r f o u r or f i v e months u n t i l t h e bank loans are thus l i q u i d a t e d t o p l a c e
orders f o r the t o o l s , d i e s , j i g s , and f i x t u r e s w i t h which t o r e t o o l i t s p l a n t .
I n the circumstances, i t may be necessary f o r K a i s e r - F r a z e r t o use a p o r t i o n o f
t h e RFC l o a n , t o g e t h e r w i t h i t s cash on hand, t o pay t h e banks.
The RFC w i l l r e c e i v e as s e c u r i t y not o n l y the c o l l a t e r a l , c o n s i s t i n g o f machinery
and equipment upon which t h e banks p r e s e n t l y have a c h a t t e l mortgage, b u t a l s o
a f i r s t mortgage on r e a l e s t a t e , b u i l d i n g s , and appurtenances comprising o f the
W i l l o w Run p l a n t . I n a d d i t i o n , RFC has r e q u i r e d a $15,000,000 guaranty, executed
by K a i s e r Engineers, I n c . and Henry J . Kaiser Company. T h i s guaranty w i l l be
©urfeflt , b y c o l l a t e r a l s a t i s f a c t o r y t o RFC having a market value o f $10,000,000.
Coverdale and C o l p i t t s , a n a t i o n a l l y - k n o w n f i r m o f c o n s u l t i n g engineers, has made
an i n s p e c t i o n and a p p r a i s a l o f the l a n d , f i x t u r e s , machinery and equipment and
p l a c e d wpon them a recoverable value on a ' g o i n g concern b a s i s " o f $58,000,000
and on a "piece by piece b a s i s " o f $35,500,000. These v a l u a t i o n s do not i n c l u d e




t h e estimated f o r c e d l i q u i d a t i o n value o f $2,083,000 f o r t o o l s , d i e s , j i g s and
f i x t u r e s , c o s t i n g approximately $16,000,000, which w i l l be purchased w i t h * p o r t
o f the proceeds o f t h e RFC l o a n and on which RFC w i l l have a f i r s t l i e n .
The Board o f D i r e c t o r s o f R e c o n s t r u c t i o n Finance C o r p o r a t i o n b e l i e v e s ,
t h a t t h e l o a n i s w e l l secured and w i l l be r e p a i d .

therefore,

K a i s e r - F r a z e r employs d i r e c t l y approximately 10,000 persons and reafcoriahly
estimates t h a t an a d d i t i o n a l 44,000 are employed b y more t h a n 1000 s m a l l manuf a c t u r e r s which supply p a r t s and m a t e r i a l s and by d e a l e r s and d i s t r i b u t o r s o f
K a i s e r - F r a z e r automobiles and automobile accessories throughout t h e n a t i o n .
The widespread p u b l i c i n t e r e s t i n t h e success o f K a i s e r - F r a z e r s p r i n g s n o t o n l y
f r o m the number o f employees and the number o f s m a l l businesses which a r e , t o a
l a r g e e x t e n t , dependent upon i t , b u t a l s o by reason o f the broad d i s t r i b u t i o n o f
i t s stock which i s h e l d by approximately 40,000 s t o c k h o l d e r s . Mr. Henry K a i s e r ,
t h e members o f h i s f a m i l y and t h e v a r i o u s companies i n which t h e y are i n t e r e s t e d
own l e s s t h a n 10$ o f t h e stock o f K a i s e r - F r a z e r C o r p o r a t i o n .
Since r e c e i v i n g your l e t t e r o f October 11, t h e D i r e c t o r s have approved a s h o r t term l o a n o f $10,000,000, m a t u r i n g i n e i g h t e e n months, t o K a i s e r - F r a z e r Sales
C o r p o r a t i o n , a s u b s i d i a r y , t o enable i t t o f i n a n c e a t wholesale l e v e l t h e
m a r k e t i n g and d i s t r i b u t i o n o f K a i s e r - F r a z e r c a r s . T h i s l o a n , o r so much o f i t as
may be d i s b u r s e d , w i l l be secured by new automobiles, by t h e guaranty of K a i s e r Frazer C o r p o r a t i o n and a l s o by t h e $15,000,000 guaranty executed by Kaiser Engine e r s , I n c . and Henry J . Kaiser Company, t o which r e f e r e n c e i s made i n a preceding
paragraph.
The RFC Board o f D i r e c t o r s b e l i e v e s t h a t t h i s l o a n a l s o i s w e l l secured and w i l l
be r e p a i d .
The D i r e c t o r s o f RFC are convinced t h a t these loans w i l l enable K a i s e r - F r a z e r
Corporation t o maintain a production l e v e l t h a t w i l l insure p r o f i t a b l e operation,
w i l l p r o v i d e employment f o r thousands o f workers, w i l l a s s i s t and encouragemany i
s m a l l businesses, w i l l increase p r o d u c t i o n i n a number o f manufacturing f i e l d s
/
1
and g e n e r a l l y promote the economic s t a b i l i t y o f t h e c o u n t r y .
Sincerely yours,
/ s / Harley Hise
Chairman
Enclosed i s copy o f a Press Release issued yesterday