Spansion committee objects to statement, seeks exclusivity termination

By Caroline Salls

Pittsburgh, Dec. 9 - Spansion Inc.'s official committee of unsecured creditors objected to the disclosure statement for the company's proposed plan of reorganization and asked the U.S. Bankruptcy Court for the District of Delaware to terminate Spansion's exclusivity to allow the committee to file a competing plan, according to a Wednesday court filing.

After reviewing the company's plan, the committee said it found that the plan paid the holders of floating-rate notes more than in full.

As a result, the committee said it recommended changes to the treatment of the floating-rate notes in connection with the equity in the reorganized company to be received by the noteholders; the no-call feature of the convertible debt instrument to be received by the noteholders, which the committee said would keep Spansion from paying 100% of the debt instrument in cash before the 2016 maturity date; and the number of directors to be appointed by the floating-rate noteholders.

The committee said the debtors and the noteholders agreed to the terms of a revised plan, which satisfied some but not all of the committee's concerns.

Specifically, the revised plan stripped the noteholders of any equity distribution and allowed the company to cash out the convertible debt, but only before Jan. 31. After that, the debt returns to the no-call features.

The committee said these plan changes are not enough to address its concerns.

"By definition, a party refusing to be paid cash for the full amount of its claim because that claim can be converted into an equity interest must believe that such equity interest is worth more than payment in full and in cash of the claim," the committee said.

The committee said that recovery violates the Bankruptcy Code and renders the plan unconfirmable.

In addition, the committee said Spansion and the noteholders have decided to punish it for its decision not to support the plan by stripping it of several provisions that were designed to protect the interests of unsecured creditors.

A hearing is scheduled for Dec. 14.

Spansion, a Sunnyvale, Calif.-based maker of flash memory products, filed for bankruptcy on March 1, 2009. Its Chapter 11 case number is 09-10690.

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