AMF's first-lien lenders object to statement, call plan unconfirmable

By Jim Witters

Wilmington, Del., May 22 - An informal group of AMF Bowling Worldwide, Inc.'s first-lien lenders object to the disclosure statement AMF filed in connection with its proposed Chapter 11 plan, according to documents filed May 22 with the U.S. Bankruptcy Court for the Eastern District of Virginia.

As previously reported, AMF filed a new plan and disclosure statement on May 20 that anticipates a merger with Strike Holdings LLC, known as Bowlmor.

The first-lien lenders say the new disclosure statement "describes a plan of reorganization that cannot be confirmed because it purports to reinstate the first-lien lenders' claims in violation of ... the bankruptcy code and fails to provide for the payment in full of the first-lien lenders' claims by failing to provide the first-lien lenders with post-petition interest at the contract default rate."

The defects "render the plan unconfirmable on its face," they say.

The new plan also seeks to deprive the first-lien lenders of the right to vote on the plan.

"If the court were to deny confirmation of the new plan on these grounds, the debtors would be required to modify and resolicit the new plan. Under such circumstances and in light of the impending maturity of the debtors' debtor-in- possession financing, there is no time for the debtors to resolicit votes on the new plan and the debtors would be left without a confirmable plan or the financing to continue to fund these cases," the filing states.

Different approach

The new disclosure statement and new plan should be modified to allow the default interest issue to be decided at the confirmation hearing without any prejudice to the first-lien lenders or undue pressure being placed on the court, the lenders say.

To achieve this, the new plan must classify the first-lien lenders as impaired, so they may vote on the plan.

The proposed plan also would have to provide that the first-lien lenders will receive default interest should the court rule that default interest is to be included as part of the first-lien claim.

If those changes are not made, the disclosure statement should not be approved, the lenders say.

Creditor treatment

Treatment of creditors under the proposed plan includes the following:

• AMF's first-lien lenders will receive payment in full, in cash, of principal, interest at the non-default rate and their fees;

• Second-lien debt will be converted into common equity of the reorganized debtors and the right to participate in a rights offering. For an aggregate purchase price of $50 million in cash, they will receive $50 million principal amount of new second-lien loans and common equity in Bowlmor AMF.

The second-lien lenders will receive in aggregate 77.53% of the common equity in Bowlmor AMF and 100% of the common equity of the reorganized debtors;

• Holders of general unsecured claims will receive a share of $2.35 million in cash; and

• Holders of interest in debtor Kingpin Holdings, LLC, will receive 0.00000001% of the common equity in Bowlmor AMF.

In exchange for their direct and indirect interests in Bowlmor:

• The limited liability company wholly owned by Bowlmor chief executive officer Thomas Shannon will receive 20.69% of the common equity of Bowlmor AMF;

• The limited liability company wholly owned by Bowlmor chief financial officer Brett Parker will receive 1.78% of the common equity of Bowlmor AMF; and

• GBC Strike Holdings LLC will receive $10 million cash, new second-lien loans issued by Bowlmor AMF of $2.5 million, $2.5 million either of preferred stock in Bowlmor AMF or an unsecured note, and a preferred equity interest in New Shannon LLC.

A hearing for approval of the disclosure statement is scheduled for May 23.

Based in Richmond, Va., AMF is an owner and operator of bowling centers. The company filed for bankruptcy on Nov. 13, 2012 under Chapter 11 case number 12-36495.

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