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The directors of U-Sumac Corp. are finding out just how fragile a shell company built on paper assets can be.
Two months after its rebirth as a travel services company, U-Sumac's foundation has been shaken by a stalled stock swap that could leave the Akron-based company with just a fraction of its current net worth.
Until three months ago, U-Sumac was little more than a name on some practically worthless stock certificates that were the remnants of a failed Utah energy venture. It was resuscitated by Florida financier James Kavalary, who promised to pump $120 million in capital into U-Sumac for controlling interest in the company. His plans were to build a travel services company through acquisitions, using U-Sumac stock as payment, according to George E. Wilson, the new president of the company.
But that $120 million in assets, which U-Sumac is carrying at a discounted rate of $70 million on the books, is based on a future value of $15 a share for 8 million shares of stock that Kavalary owns in First Houston Corp., a Fort Worth, Texas-based financial services company. Wilson said he has a copy of Kavalary's repurchase agreement, under which First Houston promises to buy back those shares...