Republic's banks to receive $87.2 million in cash, $21 million notes under revised Perry bid

By Carlise Newman

Chicago, Dec. 8 - Perry Strategic Capital Inc. will pay $87.2 million in cash to Republic Engineered Products LLC's bank lenders under the newly negotiated agreement with creditors.

Perry, bidding through a new company called PAV Republic Inc., will also repay up to the maximum $14.3 million of borrowings under Republic's debtor-in-possession loan and issue to the banks $21 million of 10% notes due 2009, secured by a first lien against Canton Cast Roll, according to a filing with the U.S. Bankruptcy Court for the Northern District of Ohio.

The bank notes will amortize 1% per year, payable quarterly. Amortization will be prepaid from proceeds of 50% of business interruption insurance after $5 million of the insurance is received by the buyer, and until the next $20 million is paid.

Insurance proceeds in excess of $25 million will be payable to PAV Republic.

Under the revised bid, a further $60 million of notes will be issued to Republic's banks and bondholders.

Of the purchase price, $1 million will be used for wind-down expenses of the chapter 11 estate.

The revised agreement is the result of three days of negotiations between Republic, its secured creditors, unsecured creditors, the United Steelworkers union and Perry.

Under the previous agreement, Perry would have paid $40 million in cash, a further amount of up to $45 million to repay borrowings outstanding under Republic's debtor-in-possession credit facility less the amount refunded, and assume Republic's $80 million of senior secured notes.

As part of the revised agreement, the creditors' committee has withdrawn its objection to the banks' claims and the claim will be fully allowed. The banks will release the statutory creditors committee and its members and advisors of all claims related to the objection together with the withdrawal of the objection.

The bid requires court approval by Dec. 10.

Republic rejected a $101 million bid from REP Steel Acquisition LLC, a company backed by Sun Capital Partners, Inc. and affiliates of Republic's bank lenders.

Fairlawn, Ohio-based Republic produces bar steel.

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