Almatis abandons pre-packaged plan in favor of Dubai proposal

By Caroline Salls

Pittsburgh, July 23 - Almatis BV requested court approval to enter into a plan of reorganization support agreement with its largest equity holder Dubai International Capital LLC and Almatis' supporting pre-bankruptcy junior lenders, according to a Friday filing with the U.S. Bankruptcy Court for the Southern District of New York.

The company also requested court approval of a number of financing commitments and to enter into currency rate hedging contracts to minimize the impact of currency rate fluctuations on the proposed transactions.

Earlier this month, Almatis attorney Michael A. Rosenthal said in a letter to the court that the company wanted to postpone its plan of reorganization hearing to allow it to consider an alternate plan proposal made by Dubai.

Since then, the company said Friday that it has negotiated "significant improvements" to Dubai's proposal. The equity holder has also deposited its $100 million investment into an escrow account.

Rosenthal said the Dubai proposal calls for a refinancing of the company's senior debt under which senior debtholders could be paid in full and junior debtholders could receive a greater distribution than under Almatis' pre-packaged plan.

Unlike previous Dubai offers, Rosenthal said this proposal comes with evidence of financing.

According to Friday's motion, Almatis has elected to opt out of the pre-packaged plan support agreement and move forward with the Dubai proposal.

Amended plan terms

Under the amended plan:

• Senior lender claims will be paid in full, plus interest. Under the original plan, these creditors would have received either new senior debt, cash and equity for an 87% recovery or new junior debt and equity with a 78% recovery;

• Holders of second-lien claims will receive €52.1 million of unsecured notes to be issued by a newly formed intermediate holding company and the right to receive paid-in-kind preference warrants for 5% of equity after the five-year anniversary of the plan effective date, as well as the right to buy an additional 2.5% of equity on the three anniversaries after that if the notes remain outstanding.

Under the original plan, second-lien creditors would have received warrants, with an estimated recovery of 2.2%;

• Holders of mezzanine claims will receive 35.08% of the ordinary shares in the ultimate holding company of the reorganized Almatis and junior preference shares with a $14.6 million liquidation preference. Under the original plan, these creditors would have recovered 0.5% in warrants;

• Holders of junior mezzanine claims will receive 4.92% of the holding company shares and junior preference shares with a liquidation preference of $2.1 million. They will also benefit from a junior mezzanine ratchet, which increases the recovery as the company's enterprise value increases.

These creditors were to receive no distribution under the original plan;

• Holders of general unsecured claims will be paid in full either on the plan effective date or in accordance with normal terms, the same as under the original plan;

• Interests in DIC Almatis Holdco BV will be transferred to the new holding company for €1.

Under the original plan, the interests were to be transferred for the benefit of senior lenders;

• The plan will be financed by a $50 million revolving credit facility, with $10 million to be drawn on the effective date, $400 million to $420 million of dollar-denominated notes to be purchased by affiliates of GSO Capital Partners LP, €110 million of euro-denominated notes to be purchased by Sankaty Credit Opportunities IV, LP and GoldenTree Asset Management LP and the Dubai investment; and

• The Dubai investor will receive 60% of the ordinary shares of the holding company and PIK senior preference shares with a $50 million liquidation preference in exchange for its investment.

A hearing is scheduled for Aug. 3.

Almatis is a Frankfurt, Germany, developer, manufacturer and supplier of premium specialty alumina products that filed for bankruptcy on April 30. Its Chapter 11 case number is 10-12308.

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