Pierre Foods gets court OK for plan of reorganization, looking to emerge by Friday

By Jennifer Lanning Drey

Portland, Ore., Dec. 10 - Pierre Foods, Inc. obtained court approval for its plan of reorganization Wednesday from the U.S. Bankruptcy Court for the District of Delaware, according to Kirkland & Ellis attorney Jon Henes.

The company hopes to emerge from bankruptcy by the end of the week, Henes said.

"Today culminates a successful reorganization process, and Pierre is poised to emerge from Chapter 11," he said.

As previously reported, funds managed by Oaktree Capital Management LP will become the majority owner of Pierre upon confirmation of the plan.

Under the plan, Pierre will convert a portion of its existing pre-bankruptcy secured debt into distributable cash and $85 million of the existing pre-bankruptcy secured debt will be converted into a new mezzanine facility.

The remaining pre-bankruptcy secured debt will be converted into new stock.

According to an amended disclosure statement filed in October, $125 million of the company's senior subordinated note debt will be cancelled.

Unsecured creditors, including holders of the company's senior subordinated notes, can expect a 12% cash recovery to be paid in installments within four months of the plan effective date.

Pierre said previously that upon emergence, its consolidated debt will be reduced to roughly $141 million, compared with $367 million of debt at the time of the Chapter 11 filing.

Plan creditor treatment

Specific treatment of creditors will include:

• Holders of administrative claims, DIP financing claims, priority tax claims and other priority claims will recover 100% in cash;

• Holders of other secured claims will recover 100% either in cash or through the return of the collateral securing the claim;

• Holders of pre-bankruptcy credit agreement claims will recover 73% to 92% through their share of distributable cash, a mezzanine facility and new stock.

The $85 million mezzanine debt facility will bear interest at 14%, payable in cash or in kind, and will mature eight years from the effective date;

• Holders of unsecured claims will recover 12% in cash;

• Holders of equity interests in Pierre Holding Corp. will receive no distribution under the plan; and

• Intercompany interests will either be retained or replaced with new intercompany interests.

Pierre, a Cincinnati-based manufacturer, marketer and distributor of differentiated food products, filed for bankruptcy on July 15. Its Chapter 11 case number is 08-11480.

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