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 over $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 over $500 million in debt at the time of the Chapter 11 filing in March 2002. Shareholders of the holding companies that now own Formica would not receive or retain any value under the proposed Plan of Reorganization. General unsecured creditors would have the option of receiving either their ratable share of $12.775 million in cash (resulting in an estimated 11.9 percent distribution on their allowed claims) or the right to participate in a rights offering to purchase their ratable share of up to $87.5 million in equity of the reorganized company.