Port Townsend Paper parent files plan of reorganization; noteholders to receive new common stock

By Caroline Salls

Pittsburgh, March 1 - Port Townsend Paper Corp. parent PT Holdings Co., Inc. filed a plan of reorganization and related disclosure statement Wednesday in the U.S. Bankruptcy Court for the Western District of Washington.

The plan is being proposed jointly with the company's informal committee of senior secured noteholders.

The plan incorporates an agreement with the informal noteholders committee on the terms of a consensual plan of reorganization that Port Townsend announced upon its bankruptcy filing.

Under the agreement, holders of the senior secured notes will receive up to $75 million in newly issued notes and 100% of the common stock in the reorganized company.

However, existing common equity holders will receive warrants to purchase 5.25% of the new common stock with a strike price equivalent to a $170 million total enterprise value.

Upon emergence from Chapter 11, in accordance with the term sheet, the company said it expects to have less than $100 million of funded debt, representing a reduction of at least $50 million from 2006.

Treatment of creditors under the plan will include:

• Holders of other secured claims will recover 100% through either payment in full in cash, reinstatement of rights or the return of collateral, at the plan proponents' option;

• Holders of priority claims will recover 100% in cash;

• Holders of $125 million plus interest and fees in secured note claims will receive 100% of the new common stock in the reorganized company, subject to dilution by the management equity plan and warrants, plus their share of the up to $75 million noteholder term loan debt;

• Holders of general unsecured claims will receive a share of the secured note claims class distribution. If general unsecured creditors vote to reject the plan, they will receive no distribution;

• Holders of intercompany claims will have their claims adjusted, continued or discharged, at the discretion of the reorganized company;

• Workers' compensation claims will remain unaltered;

• Holders of subordinated claims will receive no distribution;

• Holders of PT Holdings interests will receive a share of equity warrants. If this class votes to reject the plan, it will receive no distribution; and

• Port Townsend Paper and Packaging interests will be retained.

The company said it plans to obtain exit financing and details will be included in a plan supplement.

Port Townsend Paper, a paper maker based in Port Townsend, Wash., filed for bankruptcy on Jan. 29. Its Chapter 11 case number is 07-10340.

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