Bankruptcy Court agrees recovery plan for Warburg Pincus's Wellman

According to the plan, the debt of the first and second lien holders will be converted into equity of the reorganised company. The first lien holders will receive 70 per cent and the second lien holders will receive 30 per cent of the common stock of the company on the plan's effective date, subject to dilution by the conversion of the newly issued convertible notes.

The company plans to raise $90m in a rights offering to repay amounts borrowed under its Debtor in Possession Credit Agreement and pay certain deferred financing fees, administrative expenses, priority claims, cure payments and professional fees.

The first lien holders will receive the proceeds from the sale of the property, plant, and equipment associated with the company's Palmetto facility.

The second lien holders will receive approximately 80 per cent of the proceeds, if any, of a litigation trust and the general unsecured creditors will receive the remainder.

The plan provides that the company will emerge from bankruptcy provided the following three events occur: the company receives $90m in cash proceeds from the rights offering; the first and second lien holder classes both vote to accept the plan of reorganisation; and payments required for certain administrative expenses, priority claims and cure claims do not exceed $28m.

The company must obtain an order from its creditors confirming the plan by 16 December.

Warburg Pincus completed a $125.4m PIPE deal for Wellman in February 2003. The funding was used to relieve some of the company's debt, but early this year Wellman found itself approaching bankruptcy

Copyright © 2008 AltAssets