Formica Corp. recently announced that it has signed a stock purchase agreement with an investment group sponsored by Cerberus Capital Management L.P. and Oaktree Capital Management LLC under which they have committed to invest $175 million in the company.
Cerberus and Oaktree are investment management companies and the two largest holders of unsecured claims in Formica’s Chapter 11 case. The company has received the support of its secured lenders for the transaction with Cerberus and Oaktree.
Under the stock purchase agreement, the equity investment by Cerberus and Oaktree will be the basis for the company’s Plan of Reorganization. Formica said that it has submitted this agreement to the bankruptcy court for approval and, if necessary, procedures for entertaining higher or better offers. Formica said it expected to emerge from Chapter 11 before the end of the first quarter of 2004.
The proposed Plan of Reorganization to be implemented in conjunction with the stock purchase agreement would provide for a reduction in the outstanding amount of the company’s secured bank debt from more than $300 million to approximately $127 million, utilizing $173 million of the $175 million investment.
The plan would also provide for the elimination of $215 million in pre-Chapter 11 unsecured bond debt. Pursuant to the proposed Plan, Formica would emerge from Chapter 11 with less than $150 million in debt on a consolidated basis and $175 million in equity, compared to more than $500 million in debt at the time of the Chapter 11 filing in March 2002.