Ultimate Electronics shareholders pull request for equity committee

By Ellen Chang

Houston, March 29 - Ultimate Electronics, Inc. shareholders who had been asking for an official official committee of equity security holders withdrew their motion onTuesday.

An ad hoc group of shareholders had asked the U.S. Bankruptcy Court for the District of Delaware to appoint an official committee of equity holders or alternatively a Chapter 11 trustee.

The committee did not give a reason for reversing its request - although it noted the action was without prejudice to its right to make a similar request in future.

The committee had been asking for the power to seek action against chairman and chief executive officer Mark Wattles for taking control of the company at what the committee claims may be a below-market price.

In addition, the non-insider shareholders group said the proposed formal committee could analyze Ultimate's business plan, work with other interested parties to come up with a valuation for the company and analyze or seek approval for potential causes of action against current or former directors.

In January and December, Wattles spent $6.2 million to acquire a 55% stake in the Thornton, Colo.-based consumer electronic retailer.

The ad hoc shareholders group noted Wells Fargo Retail Finance, the agent for the tranche A and B debtor-in-possession lenders, opposed the idea of an official equity holders committee earlier in the month claiming Ultimate doesn't have any equity value left.

However, the ad hoc outside shareholders organization contends the firm has residual equity value of over $100 million.

In buttressing their case that Ultimate has value, the ad hoc group said investors took the unusual action of bidding up the company's share price the day the firm declared Chapter 11.

On another attack of the notion Ultimate has no resources to provide current shareholders equity, the group contended either the $6.2 million in equity and $5.5 million in debt Wattles contributed has been spent to the loss of all equity holders or the CEO and the company are denying equity exists so he can buy the company "on the cheap."

Ultimate Electronics filed for Chapter 11 on Jan. 11. Its case number is 05-10104.

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