The bankruptcy court overseeing the Chapter 11 proceedings of Colt Defense approved the adequacy of the company’s proposed disclosure statement, the company announced yesterday, clearing the way for creditors to vote on the plan.
A plan-confirmation hearing is scheduled for Dec. 16.
In an amended reorganization plan filed yesterday, the company boosted the recovery for certain retail holders of its senior notes, gaining the support of the unsecured creditors’ committee for the proposed plan. As reported, the panel had objected to the company’s previous proposal on the grounds that it treated retail holders of the notes unequally (see “Colt Defense creds challenge exclusivity, eye alternate plan process,” LCD, Nov. 2, 2015).
As reported, under the company’s prior version of the plan, all senior noteholders were to exchange their claims for 100% of the company’s Class B LLC units.
But the plan’s more significant value for creditors was in a contemplated $50 million private offering for the company’s equity sponsor, Sciens Capital Management, and for certain senior noteholders, including institutional noteholders that are accredited investors with more than $100,000 of note claims.
The plan did not, however, permit the roughly 2,400 smaller, retail holders of the notes to participate in the offering.
Under the amended plan filed yesterday, those retail noteholders (assuming they vote in favor of the plan) were given the option to receive either a 7% cash payment on their allowed claims or a fourth-lien note, bearing interest at 8%, in an amount equal to 10% of their allowed claim (non-participating noteholders that vote to reject the plan would revert to the distribution of a pro-rata share of Class B LLC units).
According to the company’s revised disclosure statement, the institutional noteholders participating in the rights offering, with claims totaling $160.4 million, would see a recovery in a range of 4–15%. The retail noteholders, with claims estimated at about $102 million, would see a recovery of 9%.
Previously, the company had estimated a recovery of 3.24% for noteholders.
Meanwhile, the Wilmington, Del., bankruptcy court also yesterday extended the exclusive period during which only the company could file a reorganization plan by 90 days, through Jan. 11, 2016, and the corresponding exclusive period to solicit votes to a plan through March 10, 2016.
Plan exclusivity had expired on Oct. 13, and vote solicitation exclusivity was slated to expire on Dec. 11.
The company’s exclusivity extension motion had been set for a hearing next week, but following the changes to the proposed reorganization plan the unsecured creditors’ committee withdrew its objection to the exclusivity extension, clearing the way for the entry of an order. — Alan Zimmerman