Inland Fiber resolves litigation with note trustee, files for prepackaged Chapter 11

New York, Aug. 18 - Inland Fiber Group, LLC and Fiber Finance Corp. said they made a prepackaged Chapter 11 filing Friday after reaching a final settlement resolving all of the outstanding claims in the litigation between themselves and the trustee for their $225 million of 9 5/8% senior notes due 2007.

The bankruptcy filing was made in the U.S. Bankruptcy Court for the District of Delaware.

Under the settlement of the litigation and the plan of reorganization, noteholders will receive 68.57% of the principal amount of the notes.

Holders of $158.3 million or 70.4% of the outstanding principal amount of the notes have executed a support and lock-up agreement under which they have agreed to vote in favor of the plan.

The noteholders and the trustee have also agreed to forbear from exercising any rights and remedies under the note indenture, or from pursuing any claim relating to the notes or the subject matter of the litigation.

As part of the settlement and plan of reorganization, Inland Fiber has agreed to sell some of its assets, including its seed orchard, to a third party for $83 million.

The companies have also entered into an agreement with their insurance carriers to contribute a total of $8.3 million towards payment under the plan of reorganization.

The sale of Oregon assets to a third part and the sale of some assets in Washington state to a related party of the companies will raise enough funds to pay the amounts due under the settlement agreement and plan of reorganization.

In its Chapter 11 filing, Inland Fiber listed assets of $81.890 million and debts of more than $264.434 million.

U.S. Bank NA as trustee for the 9 5/8% notes was listed as the largest unsecured creditor with a claim of $263.075 million for principal and accrued interest. The second largest creditor was the Confederated Tribes of Warm Springs of Warm Springs, Ore., with a $20,868 claim for a deposit.

Inland Fiber is a Klamath Falls, Ore., owner of timberland and cutting rights. Its case number is 06-10884.

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