School Specialty files joint Chapter 11 plan and disclosure statement

By Jim Witters

Wilmington, Del., March 20 - School Specialty, Inc. filed a joint Chapter 11 plan of reorganization and its associated disclosure statement on March 20 with the U.S. Bankruptcy Court for the District of Delaware.

The debtors proposed a plan premised on a dual-track process in which they will simultaneously pursue a plan of reorganization and market their assets for sale.

"The dual-track process will allow the debtors to preserve optionality until it becomes clear whether an asset sale or reorganization will yield the highest value," stated the disclosure statement.

Plan overview

Under the proposed plan, all asset-based debtor-in-possession financing facilities, Bayside Capital, Inc. DIP financing claims, administrative claims, priority claims and prepetition secured claims will be paid in full in cash on or as soon as reasonably practicable following the effective date.

The plan also provides that the informal steering committee of convertible noteholders will receive cash and equity in the reorganized debtors in satisfaction of their DIP facility.

Holders of general unsecured claims and holders of noteholder unsecured claims will receive equity in the reorganized debtors.

Asset sale

If School Specialty elects to consummate a sale in lieu of reorganizing, all or substantially all of the debtors' assets will be sold to a third-party purchaser.

In that circumstance, the informal steering committee of convertible noteholders as DIP lenders, the holders of general unsecured claims and holders of noteholder unsecured claims will receive cash proceeds from the sale being distributed to the debtors' creditors in lieu of equity in the reorganized debtors.

As previously reported, the company's sale process calls for initial proposals to be submitted by March 28.

Before April 1, the debtors - in consultation with the debtor-in-possession lenders, the asset-based-loan co-collateral agent and the official committee of unsecured creditors - may select one or more parties to participate in a second stage of diligence.

The bid deadline is April 24. An auction, if needed, will be May 8.

A sale hearing is scheduled for 10 a.m. ET on May 13.

Treatment of creditors

The plan also contemplates the payment in full in cash of the ABL DIP financing claims.

In addition, the plan provides for the treatment of allowed claims against, and equity interests in, the debtors as follows:

• The informal steering committee of convertible noteholders as DIP lenders would receive either cash and new School Specialty Inc. common stock or payment in full in cash if the plan is implemented through the sale transaction;

• The prepetition secured lenders would receive payment in full in cash of their allowed claims;

• Holders of allowed general unsecured claims or allowed noteholder unsecured claims would receive either a share of unsecured creditor equity or cash distributions if the plan is implemented through the sale transaction; and

• Holders of equity interests in School Specialty Inc. will receive no distribution.

A hearing to consider the adequacy of the disclosure statement is scheduled for 10 a.m. ET on May 11.

A hearing to consider confirmation of the Chapter 11 plan is scheduled for 10 a.m. ET on May 13.

School Specialty, a Greenville, Wis.-based education company, filed for bankruptcy on Jan. 28. The Chapter 11 case number is 13-10125.

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