The company said it emerged with liquidity of about $360 million after eliminating roughly $3 billion in debt via its Chapter 11 proceeding. The company said it would have about $1.2 billion of post-emergence pro forma debt.
As reported, several appeals remain to be resolved in the case regarding whether make-whole payments are due on the company’s first- and 1.5-lien notes ($1.1 billion of 8.875% first-priority senior notes due 2020 and $250 million of 10% senior secured notes due 2020, respectively), and whether holders of the notes are entitled to a market rate of interest in the cram-down replacement notes being issued to them under the company’s reorganization plan.
The White Plains, N.Y., bankruptcy court confirmed the company’s reorganization plan on Sept. 11.
As reported, under the company’s proposed plan, holders of the first- and 1.5-lien notes will receive replacement notes paying interest at fixed rates calculated at T+200 for first-lien noteholders, and T+275 for holders of the 1.5-lien notes, at the time of emergence.
As reported, in arriving at that cram-down interest rate, Bankruptcy Court Judge Robert Drain rejected the argument that holders were entitled to a market rate of interest and held that, under Supreme Court precedent, the cram-down interest rate need only equal a risk-free base rate plus a risk premium of 1%-3%. Drain’s ruling has proved controversial, however, because of his application of the Supreme Court precedent, which involved a Chapter 13 proceeding, to a Chapter 11 case.
Beyond the plethora of issues involving the senior debt, second-lien lenders ($1.161 billion of 9% second-priority springing lien notes due 2021 and €133 million 9.5% second-priority springing lien notes due 2021) are to receive all of the equity in the reorganized company (after giving effect to the subordination provision of the subordinated notes), along with participation rights in a $600 million rights offering at a price per share determined by using the pro forma capital structure and an enterprise value of $2.2 billion, applying a 15% discount to the equity value. – Alan Zimmerman