Formica Gains Court Approval for Investment Propos
WARREN, NJ, July 2--Formica Corp. today announced that the U.S. Bankruptcy Court has approved the Stock Purchase Agreement involving the Company and all of its subsidiaries with an investment group sponsored by Cerberus Capital Management L.P. and Oaktree Capital Management LLC.
Cerberus and Oaktree are the Company's largest holders of Formica bonds.
The Stock Purchase Agreement calls for the investment group to invest $175 million, $173 million of which will be used to repay secured bank debt leaving the Company with approximately $160 million of senior secured debt remaining in the reorganized business in a transaction valued at $427 million. Formica had over $540 million in debt at the time of its Chapter 11 filing. Additionally, the Court approved an extension for sixty days for the Company to exclusively file a Plan of Reorganization.
The Bankruptcy Court also authorized the Company to proceed directly to filing a consensual Plan of Reorganization without a bidding process.
The Company also announced said that it has reached a consensual settlement agreement with its Committee of Unsecured Creditors to support the Company's Plan of Reorganization jointly developed with the investors.
Under the settlement reached by the Unsecured Creditors Committee, the Steering Committee for the Prepetition Senior Secured Lenders, the Company and the buyer, FC Acquisition Holding Corp., general unsecured creditors' claims shall be discharged by receiving a pro-rata share of up to $12.775 million in cash and up to $8.675 million in new subordinated secured notes, which cash and notes are subject to reduction for payment to the Unsecured Convenience Class of creditors, each member of which will receive the lesser of 20% of each allowed unsecured claim or $10,000.
Under the Joint Plan of Reorganization, the investors will not participate in the recovery by unsecured creditors.
As previously disclosed, the Company has received the support of its secured lenders for the transaction and the Plan of Reorganization. Implementation of the Plan is conditioned on confirmation by the Bankruptcy Court.
"Today's actions are indeed welcome news and significant milestones in our reorganization," said Formica President and Chief Executive Officer Frank A. Riddick, III. "These developments should accelerate the timetable for the Company's emergence from Chapter 11 because all of the relevant constituencies have agreed to support the Company's prompt emergence. We continue to be appreciative of the support we have received during this period from our customers, suppliers and employees, all of whom have allowed us to use this process to lay the foundation for future success worthy of Formica's great heritage. We are excited by the participation of Cerberus and Oaktree as investors.
Formica will emerge as a more competitive and financially stronger company with a steady stream of new product offerings and operational capabilities that will ensure we will be the best supplier to our customers in this industry."