Huffy disclosure statement approved

By Caroline Salls

Pittsburgh, Aug. 17 - Huffy Corp's disclosure statement for its plan of reorganization was approved Tuesday by the U.S. Bankruptcy Court for the Southern District of Ohio.

A hearing on confirmation of the plan is scheduled for Sept. 22.

Under the plan, holders of Sinosure Group unsecured claims will receive 100% of the class A new common stock of the reorganized company and general unsecured creditors will receive 100% of the class B new common stock of the reorganized company.

In turn, Sinosure claimants will hold 30% of the class A and class B common stock and unsecured creditors will hold 70%.

The company will issue $3 million of distribution notes A and $9 million of distribution notes B under the plan, both at 10% interest and both maturing Dec. 31, 2010.

Sinosure is a group of Chinese bicycle suppliers and the Chinese government's export credit insurance agency, China Export & Credit Insurance Corp., which continues to provide trade credit to Huffy on favorable terms during its bankruptcy reorganization.

Sinosure claimants' share will be subject to dilution by shares of new class C common stock reserved for issuance in connection with the management incentive plan, its share of the total $3 million of distribution notes A and their interest (shared with general unsecured creditors) in the net proceeds of the recovery trust.

The unsecured creditors' share is subject to dilution by shares of new class C common stock to be issued in connection with the management incentive plan and additional new class A common stock issued as Sinosure performance shares, their share of the distribution of distribution note B and their interest (shared with the Sinosure Group claims) in the net proceeds of the recovery trust.

The Sinosure Group's ability to earn Sinosure performance shares will increase its overall percentage of ownership in the reorganized parent company.

If the Sinosure Group earns all the performance shares possible under the plan, the new class B common stock shareholders' interest in the reorganized parent will be diluted over time to 49% of the total equity interest while the Sinosure Group's interest will increase to 51%, in both cases subject to dilution by new class C common stock distributed in connection with the management incentive plan.

As holders of all outstanding new class A common stock, the Sinosure Group will be able to elect a majority of the board of directors of the reorganized company and to exercise control of the company.

Other general unsecured creditors will have the right to elect two members of the board.

Treatment of creditors

Treatment of creditors under the plan will include:

*Holders of $43 million in debtor-in-possession lender claims will receive 100% recovery in cash;

*Holders of priority secured claims will receive 100% recovery in cash;

*Holders of other secured claims will receive 100% recovery in cash, the collateral restoring the lien of the claim or reinstatement of the claim;

*Holders of $50 million in Sinosure Group unsecured claims will receive 26.4% recovery in 100% of the class A new common stock of the reorganized company, as well as its share of new class C common shares, distribution notes A, its interest in net proceeds of the recovery trust and additional new class A shares issued as Sinosure performance shares;

*Holders of $100 million in general unsecured claims will receive 100% of the new class B common stock of the reorganized company, plus its share of new class C common stock, their share of the distribution notes B and their interest in net proceeds of the recovery trust and additional class A common stock as Sinosure performance shares; and

*The holders of old equity interest will receive nothing.

Huffy, a Miamisburg, Ohio-based bicycle and sporting goods company, filed for bankruptcy on Oct. 20, 2004. Its Chapter 11 case number is 04-39148.

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