Home Products granted court approval of disclosure statement; plan confirmation hearing March 8

By Jennifer Lanning Drey

Portland, Ore., Jan. 30 - Home Products International, Inc. obtained court approval of the second-amended disclosure statement for its plan of reorganization, according to a Tuesday filing with the U.S. Bankruptcy Court for the District of Delaware.

The plan confirmation hearing is scheduled for March 8.

Under the company's plan of reorganization, treatment of creditors will include:

• Holders of $63.63 million in administrative claims, including debtor-in-possession facility claims, will be paid in full in cash;

• Holders of $500,000 in general unsecured claims will recover 100% in retention of the rights to their claim;

• Holders of $122.77 million in noteholder claims will recover 4% either in their share of 95% of the new common stock in the reorganized company or through a cash-out option that gives noteholders cash equal to $22.97 for each $1,000 of notes held in lieu of stock.

All noteholders will also receive the right to participate in a new convertible notes election option;

• Holders of Home Products International equity interests will have their interests cancelled, but if they vote to accept the plan, these equityholders will receive cash equal to $0.017 per share or can participate in a stock election option.

These creditors will also receive the right to participate in the new convertible notes election option; and

• Holders of Home Products International - North America equity interests will retain their interests.

Under the plan, holders of the company's equity interests will have the option to receive new stock in lieu of cash, with each interest holder electing to participate in this stock election option to receive their share of 5% of the new common stock.

The cash payments of interest holders that choose not to elect the stock option will reflect a 30% discount to the value of the new stock to be distributed under the plan.

Also under the plan, the reorganized company will issue $25 million of new 10-year 6% second-lien convertible notes.

Each eligible creditor will have the right to elect to purchase the new convertible notes in an amount based upon that holder's proportionate ownership of the new common stock on the effective date.

The new convertible notes will be secured by a second-priority security interest in all of the collateral securing the company's exit facility.

The new convertible notes will be convertible, at any time and at the holder's option, into new common stock at a price per share that reflects a 20% premium on the new stock based on the valuation of the reorganized company as of the plan effective date.

The new convertible notes will not be redeemable by the reorganized company until the fifth anniversary after the effective date, and they will be redeemable at 105% of the principal plus interest during the sixth year following the effective date; 104% during the seventh year; 103% during the eighth year; 102% during the ninth year; and 101% during the 10th year.

Third Avenue Management, LLC will serve as the backstop lender for 85% of the new convertible notes facility, and Storage Acquisition Co., LLC will backstop the remaining 15%, both for a backstop fee equal to 2% of their commitments.

Home Products, a Chicago housewares company, filed for bankruptcy on Nov. 20. Its Chapter 11 case number is 06-11457.

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