Conexant Systems' disclosure statement, final DIP facility approved

By Jim Witters

Wilmington, Del., April 19 - Conexant Systems Inc. won approval for the disclosure statement associated with its plan of reorganization and final approval of its $15 million debtor-in-possession financing facility during an April 19 hearing in the U.S. Bankruptcy Court for the District of Delaware.

Conexant attorney Joshua Sussberg said all objections to the disclosure statement and the DIP financing facility were resolved through a settlement with two Conexant landlords and one subtenant.

Through the global settlement, the Chapter 11 plan now includes a $2.9 million recovery for general unsecured creditors, up from $2 million, Sussberg said. All lien challenges were resolved, and the secured lender waived a possible deficiency claim.

But the agreement with two landlords laid the groundwork for a fully consensual hearing, he said.

Robert L. LeHane, representing the official committee of unsecured creditors, said the landlords' objections presented "the most important hurdle we had to clear in this case."

DIP terms

The financing is through Conexant's equity sponsors and secured lender QP SFM Capital Holdings Ltd., an entity managed by Soros Fund Management LLC.

The DIP facility is intended to carry the semiconductor company through an expedited bankruptcy process that calls for the confirmation of a plan within 85 days and a plan effective date within 120 days, Sussberg said.

The DIP financing will convert into equity in the reorganized company.

Interest will be Libor plus 700 basis points.

The facility will mature on the earliest of 120 days from closing, the plan effective date and the closing of a sale of substantially all company assets.

No commitment fee will be paid.

Landlord agreements

LeHane said the lease agreements will be settled through a proposed order he hopes to file with the court within a week.

The agreements call for the following:

• Landlord PRES-4340 Von Karman, LP's lease will be terminated, and the subleases associated with the PRES properties will be rejected by the debtor;

• PRES will receive $300,000 cash and an allowed general unsecured claim of $4.5 million;

• Landlord ELPF Scranton Road LP's lease and any subleases will be rejected;

• ELPF will receive $300,000 cash and an allowed general unsecured claim of $7.42 million; and

• Sublessee CCH Inc.'s sublease with PRES will be terminated, and CCH will be granted 60 days to vacate the property.

Plan details

As previously reported, the secured lender will exchange roughly $195 million of secured debt for equity in the reorganized company and will receive $76 million of unsecured notes issued by a holding company, which can elect to either pay interest in cash or accrue interest in kind.

The company said the new unsecured notes will be non-recourse to the reorganized Conexant operating company.

Creditor treatment

Treatment of creditors under the proposed plan includes the following:

• Holders of priority non-tax claims will be paid in full in cash if the claims do not exceed a cap, or a share of $1 million if they do exceed the cap;

• Holders of other secured claims will be paid in full in cash if the claims do not exceed a cap, or a share of $1 million if they do exceed the cap, or they will receive the collateral securing the claim or other treatment that leaves the claims unimpaired;

• Holders of secured note claims will receive 100% of the new notes and a share of a secured claims recovery pool in connection with the total amount of all debtor-in-possession facility claims and the secured notes claim.

The secured notes claim will not include the secured notes deficiency claim, which will be treated as a general unsecured claim;

• Holders of general unsecured claims will receive a share of a general unsecured claims recovery pool. If the general unsecured claims class votes to accept the plan, the secured lender will be deemed to have waived its secured notes deficiency claim and its right to participate in the general unsecured recovery pool;

• To preserve the debtors' corporate structure, intercompany claims and intercompany interests will be paid, adjusted, reinstated in full or in part or cancelled or discharged in full or in part to the extent determined appropriate by the reorganized company with the consent of the secured lender; and

• Holders of interests in Conexant will receive no distribution.

The plan confirmation hearing is scheduled for June 4.

Conexant, a fabless semiconductor company based in Newport Beach, Calif., filed for bankruptcy on Feb. 28. The Chapter 11 case number is 13-10367.

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