Pac-West granted court approval for plan of reorganization

By Jennifer Lanning Drey

Portland, Ore., Nov. 19 - Pac-West Telecomm, Inc. obtained court approval for its plan of reorganization from the U.S. Bankruptcy Court for the District of Delaware, according to a Monday filing with the court.

Under the plan, debtor-in-possession lender Pac-West Funding Co. LLC will provide $18 million of exit financing in exchange for 100% of the common stock in the reorganized company.

In addition, a liquidating trust will be funded by the proceeds of avoidance actions, with the liquidating trust assets to be distributed to general unsecured creditors.

Also under the plan, holders of the Merrill Lynch secured claim will receive $500,000 in cash and a new $825,000 Merrill Lynch note.

In addition, Pac-West said it will attempt to sell the collateral securing the Merrill Lynch claim, with the Merrill Lynch claimants to receive 70% of the net proceeds and the company to receive the other 30%.

The Merrill Lynch creditors will also have a $5.34 million deficiency claim against Pac-West, which will be treated as an unsecured claim.

The $500,000 cash payment, $825,000 new note and the amount of proceeds from the collateral sale will be deducted from the deficiency claim.

Creditor treatment

Treatment of creditors under the plan will include:

• Holders of priority claims will receive full payment in cash;

• Holders of exit facility claims will receive 100% of the new common stock in the reorganized company;

• Holders of pre-bankruptcy lenders claims will be paid in full in cash from the proceeds of the new secured notes to the extent that the claim has not already been paid;

• Holders of other secured claims will receive either retention of the rights to their claims or the return of the property securing the claim. The company can also elect to return a portion of the property securing the claim and pay the balance in cash or in a note;

• Holders of general unsecured claims will receive liquidating trust interests and a share of liquidating trust assets;

• Holders of Pac-West equity interests will receive no distribution under the plan; and

• Holders of equity interests in debtors other than Pac-West will retain 100% of their interests.

Pac-West, a Stockton, Calif., wholesale provider of advanced telecommunications services, filed for bankruptcy on April 30. Its Chapter 11 case number is 07-10562.

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