Radnor asks court to extend sale process to allow for $250 million noteholder bid

By Caroline Salls

Pittsburgh, Nov. 16 - Radnor Holdings Corp.'s official committee of unsecured creditors requested an emergency extension to the bid deadline, auction and sale hearing dates for the proposed sale of substantially all of the company's assets to allow due diligence to be completed on a $250 million competing bid from noteholder Four M Investments, LLC in collaboration with committee representatives.

According to a Wednesday filing with the U.S. Bankruptcy Court for the District of Delaware, the committee has been seeking an alternative to the stalking horse bid made by TR Acquisition Co., Inc., an affiliate of Tennenbaum Capital Partners, LLC.

As a result, the committee said Four M Investments would submit a $250 million bid, which would provide a distribution to unsecured creditors, before the Nov. 16 bid deadline.

However, in light of the upcoming Thanksgiving holiday, Four M's lender would not be able to complete its due diligence until Nov. 27.

According to the motion, Four M is a holder of the company's 11% senior notes and is the product of collaboration between committee representatives and Four M principal Dennis Meheil.

The committee said Meheil believes there is "a substantial upside value" in Radnor's business, and he has committed to provide a $10 million preferred stock equity investment as part of the financing for the Four M bid.

In addition, Meheil has agreed to take on the role of chairman and chief executive officer of the business after the sale.

The committee said it agrees that the business has upside potential, and one of the primary sources of financing for the Four M bid will be some bondholders and members of the committee, possibly including Barclays Bank plc and The Airlie Group, who expect to provide a new senior revolving credit facility and new mezzanine debt.

According to the motion, the Four M bid will be financed by a new $60 million senior revolver, $40 million in new mezzanine debt and the $10 million preferred equity investment.

In addition, unsecured creditors will receive shares equal to 20% of new common stock and the mezzanine lenders and Four M will each receive shares equal to 40% of the new common stock.

Radnor's debtor-in-possession facility will be repaid in full.

Also, the Tennenbaum tranche A and tranche B notes will be assumed by Four M, while the Tennenbaum tranche C notes will receive no distribution because the offer assumes that the tranche C notes will be subordinated or recharacterized.

All other secured debt will be assumed.

The Four M bid requires the Tennenbaum tranche C notes to be subordinated, recharacterized or otherwise disallowed or avoided in the committee's related adversary proceeding challenging the Tennenbaum secured claims.

The committee said the Four M bid matches the Tennenbaum bid, plus provides 20% of the new common shares to unsecured creditors.

The Four M bid also gives unsecured creditors $20 million of preferred stock with a 10% dividend in the company's Finnish operations and the benefit of any litigation claims.

As a result in the due diligence delay, the committee is seeking an extension of the bid deadline to 4 p.m. ET on Nov. 28 from 4 p.m. ET on Nov. 16; an extension of the auction date to Nov. 30 from Nov. 20; and an extension of the sale hearing to Dec. 1 from Nov. 21.

Tennenbaum objection

On Thursday, Tennebaum, Special Value Opportunities Fund, LLC and Special Value Expansion Fund, LLC objected to the committee's extension motion, saying it has been working with Four M on a potential bid for more than a month and should be required to submit its bid by the Nov. 16 deadline.

Tennenbaum said since the committee has been working with Four M for more than a month, it "is entirely inappropriate" for the committee to drop its motion on the Tennenbaum lenders one day before the bids are due.

In addition, Tennenbaum said there is no legal basis for Four M's proposed treatment of Tennenbaum's lender claims, and the proposed bid does not comply with the terms of the approved bid procedures for the asset sale.

Radnor, a Radnor, Pa.-based foam cup, container and expandable polystyrene bead manufacturer, filed for bankruptcy on Aug. 21. Its Chapter 11 case number is 06-10894.

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