Jackson Products doesn't get support for exchange, files prepackaged Chapter 11

By Jeff Pines

Washington, Jan. 13 - Despite getting overwhelming support for its proposed exchange offer from noteholders, it wasn't enough for Jackson Products, Inc. Instead, the St. Louis-based maker of hard hats, safety goggles and other equipment for highway and personal safety made prepackaged Chapter 11 filing on Monday.

"We got just over 90%," said Mike Pruss, Jackson's interim chief financial officer, but the non-approving parties he believes were speculative hold-out players. The company needed 100% participation for the offer to go through. He thinks they were holding out for a buyout.

"There wasn't really productive dialog with those holders so it's really hard to speculate why they didn't tender their notes," Pruss told Prospect News.

The company believes it can emerge from bankruptcy in less than 60 days if the prepackaged plan is approved. Terms of the plan are similar to those offered in the exchange.

In all, the company has at least $249 million of liabilities held by more than 4,000 creditors.

Jackson has $115 million of 9½% unsecured senior subordinated notes due April 15, 2005 and $13 million of 15% secured senior subordinated notes due Dec. 31, 2004. The trustees who are custodians for more than $1 million of the notes are: The Bank of New York with a claim of $38.17 million, ABN Amro with $24.48 million, JPMorgan Chase with $20.55 million, Citibank with $20.48 million, Bear Stearns with $7.17 million, Goldman Sachs with $3 million, Morgan Stanley & Co. with $1 million, according to a court document.

Under the terms of the reorganization plan, the 15% secured senior subordinated note holders will receive 1.99763 shares of new of common stock and 1.05 shares of new preferred stock for each $1,000 of principal plus interest. Jackson estimates there is $13.7 million outstanding to be paid. Holders of the 9½% senior subordinated note holders will receive 0.35613 of a share of new common stock and 0.17825 of a share of new preferred stock for each $1,000 of principal. These are the same terms as those Jackson offered in its exchange for the 9½% notes.

The existing common stock and warrants will be cancelled.

Jackson's pre-bankruptcy financing included about $22.1 million in principal on revolving loans, $5.2 million in contingent letter of credit reimbursement obligations and $63.49 million in term loans. All of the loans were secured and get a higher priority than other claims.

DIP details

The debtor-in-possession facility, which was negotiated at arms length, involves a $10 million revolver with sublimits of $1 million for letters of credit and $1 million for swingloans.

The interest rate on the DIP will be prime plus 250 basis points. The proceeds will be used for working capital and capital expenditures. The commitment fee will be 50 basis points on the unused portion of the revolver, a facility fee of $200,000, a 3.5% per annum letter of credit fees and an administrative agent's fee. Fleet National Bank is the agent for the lenders. It was also a pre-bankruptcy lender for the company.

According to Jackson's filing, some terms of the DIP facilty were still being negotiated. A final hearing is scheduled for Jan. 27.

If the company is forced into Chapter 7 and must liquidate, it estimates it has $51 million available to its creditors.

Houlihan Lokey Howard & Zukin is Jackson's financial advisor.

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