Bankrupt Wellman gets court nod for equity reorganisation plan

17 November 2008

Bankrupt polyester and plastics maker Wellman will seek creditors' nod for a revamped reorganisation plan involving conversion of part of its debt into equity shares.

Wellman said it has received approval from a bankruptcy court in Manhattan for the revamped reorganisation plan formulated after it realised that an exit loan won't be forthcoming.

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

The first and second lien lenders will be able to purchase $120 million in convertible notes at a rights offering for $90 million in cash. The notes can be converted into 60 per cent of the common stock in a reorganised Wellman.

As much as $28 million from the rights offering will be used to cover administrative expenses, about $51 million outstanding on Wellman's debtor-in-possession loan and certain other costs. The rights offering is expected to be backstopped by first- and second-lien lenders.

First-lien lenders, due $185 million, will convert their prepetition debt into 70 per cent of the new common stock, subject to dilution from the rights offering and a management incentive plan. The first-lien lenders will also receive all the proceeds from the assets sold related to Wellman's idled facility in Darlington County, SC.