Owens Corning faces an important hearing on 10 July 2006 in its renewed push to exit bankruptcy, with the session likely to examine the sufficiency of data to be provided to creditors who will vote on…
Owens Corning faces an important hearing on 10 July 2006 in its renewed push to exit bankruptcy, with the session likely to examine the sufficiency of data to be provided to creditors who will vote on the Chapter 11 reorganization plan. On 30 June 2006, Owens Corning listed the objections filed against its disclosure statement, which is sent out to creditors along with ballots to explain the issues on which they will vote. Solutions have already been found for many of the objections that were filed, the company reported. On 10 July 2006 Owens Corning will ask US Bankruptcy Judge Judith Fitzgerald to dismiss the other objections or set them aside until it returns to seek confirmation of its Chapter 11 plan. Objections to Owens Corning“s restructuring proposal range from the narrowly technical to wide ranging disagreement. But none comes from the crucial creditor bodies that have already signed up to support the plan. Fitzgerald approved the plan support agreement towards the end of June 2006, an accord that almost guarantees Owens Corning will have the support required to bring its Chapter 11 plan before the judge for final approval. To gain confirmation, the company needs the votes to get into court, and then it must demonstrate that its Chapter 11 plan fulfils legal requirements. For the disclosure statement, Owens Corning needs only to convince the judge that the information being provided to creditors about the restructuring is sufficient for them to make an informed decision on the vote. Some asbestos personal-injury firms objected to the disclosure statement“s technical description of the mechanism for funding the trusts that will absorb the asbestos liabilities that forced Owens Corning into bankruptcy. Those objections have been resolved, or are in the process of being resolved, the company said in court papers filed 30 June 2006. The official committees representing current and future asbestos claimants are parties to the plan support agreement, and they promised to support Owens Corning“s Chapter 11 proposal. In common with many other companies struggling to pay asbestos-related damages, Owens Corning has been attempting to use Chapter 11 to resolve its product liabilities. The firm“s aim is to bring the operations through the bankruptcy intact, while diverting the asbestos claims to a trust. Companies that bought USD 48 million worth of trade claims in the case say the deal on offer now is very different from previous Owens Corning plans. Instead of sharing a part-cash, part-stock recovery together with bondholders, trade claimants are now getting all cash. The change benefits bondholders to the detriment of trade claims holders, according to an objection filed by Contrarian Capital Management and Longacre Master Fund Ltd. In a departure from other Chapter 11 cases, the claims traders say they would like more stock, and less cash, in their recovery, due to the good reception Owens Corning“s new stock is likely to have on the market once the company exits bankruptcy. Existing shareholders will receive warrants to purchase new shares that may have value at some date in the future, if Owens Corning fares very well once it is out of bankruptcy. The disclosure statement objection from the trade claims buyers is a sign of their high hopes for Owens Corning once it leaves the stigma of bankruptcy behind. The Chapter 11 axiom that “cash is king” does not apply in Owens Corning“s case, say claims buyers Contrarian Capital and Longacre Master, who say they are being shortchanged with a 58.4% cash recovery, instead of stock. Bondholders whose debt ranks on a par with the trade claims will also receive a recovery set at 58.4%, the trade claims buyers say. However, the bondholders will receive new common stock in the reorganized Owens Corning, something that Contrarian Capital and Longacre say is worth more than cash. In its official response, Owens Corning says the protest from the trade claims contingent is one that should be left to the confirmation hearing. Schultze Asset Management LLC, a firm that represents holders of USD 60 million in bonds, objects to Owens Corning“s plan to leave some value in the hands of equity holders, while more senior classes of creditors are not being made whole. Schultze“s objections, should be left for argument at the Chapter 11 confirmation hearing later in 2006, Owens Corning says.