Home Products International exits Chapter 11 with $50 million exit facility

By Caroline Salls

Pittsburgh, March 22 - Home Products International, Inc. emerged from Chapter 11 bankruptcy when its plan of reorganization took effect Tuesday, according to a Wednesday filing with the U.S. Bankruptcy Court for the District of Delaware.

The plan was confirmed on March 8, and the court also approved a five-year $50 million revolving credit exit facility from Bank of America, NA, with $8 million available for letters of credit.

The facility can be increased to $60 million.

Proceeds will be used to repay the company's debtor-in-possession facility, to make payments and distributions under the plan of reorganization, for payments of costs and fees and for general operating and other purposes.

Interest will accrue based on the average gross availability.

If the average gross availability is greater than $20 million, advances will be made at Libor plus 125 basis points; if the availability is between $15 million and $20 million, interest will be Libor plus 150 bps; and if availability is less than $15 million, interest will be Libor plus 175 bps.

All voting classes accepted the plan.

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 also received the right to participate in a new convertible notes election option;

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

These creditors also received 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 had 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 chose not to elect the stock option will reflect a 30% discount to the value of the new stock to be distributed under the plan.

Convertibles issue terms

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

Each eligible creditor had the right to elect to purchase the new convertible notes for an amount proportional to their ownership of new common stock on the effective date.

The convertible notes election deadline was March 2.

The new convertible notes are 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 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.

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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