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February 13, 2007
Foamex International Inc. emerged from bankruptcy on Monday, Feb. 12, completing a Chapter 11 stay in which the company's fortunes soared.
The Linwood, Pa., maker of foam cushions said in a statement that its reorganization plan has taken effect and it has begun making initial distributions to creditors, which should be completed by Thursday, Feb. 15.
Judge Kevin Gross of the U.S. Bankruptcy Court for the District of Delaware in Wilmington confirmed Foamex's reorganization plan on Feb. 1. The plan incorporates both a $150 million rights offering and a $790 million exit financing package.
The plan, which was altered significantly since the company experienced a dramatic uptick in operating performance, is paying all of its creditors in full and is allowing stockholders to keep their shares, subject to dilution from the rights offering.
Court papers show that $315.1 million in senior secured note claims, $208.1 million in subordinated note claims, and roughly $13.0 million unsecured claims will be completely repaid in cash.
Under the rights offering, which began on Jan. 4, each common stockholder is receiving one right per share, each of which grants the option to purchase up to 2.51 shares of common stock at $2.25 per share.
Preferred stockholders, whose shares are convertible to 100 shares of common stock, have been given the right to buy 250.6 shares of stock at $2.25 per share for each preferred share they hold.
The rights offering closed on Jan. 31.
Proceeds from the rights offering and, if utilized, the purchase of new preferred or common stock by equity holders under the plan are being used to fund plan payments, as well as the expenses related to the rights offering.
Bank of America NA, Morgan Stanley Senior Funding Inc. and Barclays Capital, meanwhile, have provided the $790 million exit loan that will be used to fund the repayment of the outstanding amount of Foamex's $320 million debtor-in-possession loan and the company's ongoing operations.
The exit financing consists of a $175 million senior secured revolver, a $425 million first-lien term loan and a $190 million second-lien term loan. The loans have maturities ranging from five to seven years and are priced at LIBOR plus 150 basis points, LIBOR plus 275 basis points and LIBOR plus 575 basis points, respectively, court papers said.
Foamex has said that it expected to draw $615 million of the exit loan upon emergence.
Additionally, Foamex said in a statement that Gregory Christian, who has served as executive vice president, chief restructuring officer, chief administrative officer and general counsel, has been named company president.
Foamex filed for Chapter 11 protection on Sept. 19, 2005, originally planning on implementing a debt-for-equity swap with its senior noteholders and wiping out common stockholders. However, during Foamex's proceedings, its financial results turned around, causing the company to scrap its original plan and head to the negotiating table. The new plan was crafted after months of talks.
Brian Hermann, Judith Thoyer, Alan Kornberg and Ephraim Diamond are debtor counsel at Paul, Weiss, Rifkind, Wharton & Garrison LLP.
Miller Buckfire & Co. LLC is the company's financial adviser.