Brooke Says Liggett Group May Not Survive

Brooke Group Ltd. said its Liggett Group cigarette unit may not generate sufficient cash to meet its debt payments, raising doubt about its future as a going concern.

Finances at the maker of Eve and Chesterfield cigarettes, which have been rocky for at least a year, have come under greater scrutiny after Liggett’s landmark agreement last month to pay 25% of its pretax income for the next 25 years to states suing the tobacco industry.

“It’s clear they haven’t been focusing on their business,” said Thomas Hoens, an analyst for Fitch Investors Service in New York. “They’ve been focusing on legal issues.”

Brooke said that if Liggett cannot find a way to refinance, renegotiate or restructure its debt, it will be in default on most of its long-term debt and credit facility agreements and may have to seek bankruptcy protection from creditors.

“These matters raise substantial doubt about Liggett meeting its liquidity needs and Liggett’s ability to continue as a going concern,” the company said in its annual filing with the Securities and Exchange Commission this week.

Brooke shares fell 37.5 cents to close at $4.375 on the New York Stock Exchange.

Liggett had a working capital deficiency of $176.5 million as of Dec. 31, about 5% wider than it had Sept. 30. At that time, however, Brooke did not mention any doubts about Liggett as a going concern.

Miami-based Brooke, a conglomerate of real estate, tobacco and other investments held together by controlling shareholder Bennett LeBow, has been struggling to make payments on various debts for at least a year, shareholders have said.

The company said in the SEC documents that it might not be able to meet three debt payments due early next year, one for $38 million, a second for $107 million and a third for $24 million.

The SEC filing was part of a 1996 year-end statement from Liggett that showed the company’s financial position has continued to deteriorate. Last year, it lost $18.4 million as sales dropped 11% to $401 million.

Liggett said 273 jobs may be cut by the end of the summer as part of a restructuring. Liggett employs 584 full-time employees and has several hundred part-time salespeople around the country.