BOISE — Washington Group International, one of the nation's largest construction companies, filed for bankruptcy protection Monday and settled in for a long fight with the Raytheon Co., which it has accused of misrepresenting the financial condition of a unit that Washington bought from it last year.
Washington, which is based in Boise, said it would continue to operate and pay its workers. The Chapter 11 bankruptcy filing, made in a Nevada federal court, included the parent company and 22 subsidiaries, which together employ around 17,000 people. As many as 70 other subsidiaries, joint ventures and partnerships, employing another 18,000 people, are not involved in the bankruptcy, the company said.
The company, formerly known as the Morrison Knudsen Corp., said that its stockholders could expect to recover nothing and that its secured creditors would own the equity assets of the reassembled company. Unsecured creditors, the company said, would be paid either through the normal course of business or upon confirmation of the plan.
Washington said it sought bankruptcy protection because of a cash-flow crisis resulting from cost overruns on some contracts and lower-than-expected profits on other contracts from the unit it acquired from Raytheon. The company has sued Raytheon, accusing it of fraud and is seeking to unwind its purchase of the unit. The deal did not include a breakup fee.
"The wheels of justice just move slowly," Stephen G. Hanks, the company's president, said in a telephone interview. "We are funding these undisclosed losses at the clip of $100 million a month, and we are simply out of cash."
In its filing, Washington listed assets of $3.8 billion and liabilities of approximately $3.3 billion.
Hanks said that he expects the reorganization will take four to six months to complete. In about two months, the company will disclose the specific conditions of the terms of the bankruptcy for unsecured creditors, who will most likely object, he said.
Credit Suisse First Boston, which lent the company $1 billion to buy the Raytheon unit, agreed to lead a group of lenders that would supply the company with money while it reorganizes under bankruptcy protection.
Dennis R. Washington, the company's chairman and chief executive, is one of the stockholders who are likely to lose out in the bankruptcy reorganization. Washington, who built his fortune acquiring troubled concerns, owned about 40 percent of the Washington Group's stock. The company's statement made no mention of Washington, though a person who answered the phone in the company's executive offices said he remained the company's chairman. He did not return a call seeking comment.
Through the 1990s, Washington expanded Morrison Knudsen in an industry where mergers are uncommon because companies are reluctant to acquire contract backlogs. Washington's acquisition of the Raytheon unit, Raytheon Engineers and Constructors, for $53 million in July, and the company's assumption of $450 million of the unit's debt, starkly illuminated that danger.
In its lawsuit, Washington said the Raytheon unit produced $700 million in debt instead of the $450 million Washington had expected. The company said it would continue the legal battle against Raytheon.
"What you'd like to see happen is some huge recovery out of Raytheon, but that seems unlikely," said John B. Rogers, a construction industry analyst for D.A. Davidson & Co., a regional brokerage based in Great Falls, Mont.
Raytheon has denied Washington's fraud claim, saying Washington studied the engineering unit and its financial books for many months before buying it. Earlier this month, Raytheon said the Securities and Exchange Commission has subpoenaed documents related to the unit.