Le-Nature's disclosure statement approved; confirmation hearing June 9

By Caroline Salls

Pittsburgh, April 10 - Le-Nature's, Inc.'s disclosure statement for its second amended plan of liquidation was approved Thursday by the U.S. Bankruptcy Court for the Western District of Pennsylvania.

The plan confirmation hearing is scheduled for June 9.

As previously reported, the company filed the plan in conjunction with its official committee of unsecured creditors, ad hoc committee of secured lenders and ad hoc committee of senior subordinated noteholders.

Under the proposed plan, a liquidation trust will be established with a five-year term and given responsibility for taking legal action on behalf of the bankruptcy estate and making distributions to creditors. It will be overseen by a board selected by the official committee of unsecured creditors, ad hoc committee of secured lenders and ad hoc committee of senior subordinated noteholders.

Under the plan:

• Holders of bank lenders' secured claims will receive tier one beneficial interests in the liquidation trust and additional interests based on disallowance of any disputed claim in this class;

• Holders of bank lenders' unsecured claims, general unsecured claims and unsecured senior subordinated notes claims will receive tier two beneficial interests in the liquidation trust, as well as additional tier-two interests based on disallowance of any claims in this class and a percentage of proceeds from the sale of TSI/Holdings property.

However, any distributions due to senior subordinated noteholders will be redirected to the bank lenders until the lenders receive $110 million as a settlement payment.

The next $15 million will go to noteholders.

After that, up to $175 million, the distribution will be split equally between lenders and noteholders, then 45% to lenders and 55% to noteholders up to $200 million, 40% to lenders and 60% to noteholders up to $225 million, 35% to lenders and 65% to noteholders up to $250 million, 30% to lenders and 70% to noteholders up to $280 million and then 25% to lenders and 75% to noteholders;

• Holders of subordinated litigation claims will receive tier three trust interests; and

• Holders of interests in Le-Nature's will receive tier four trust interests.

On Wednesday, the company announced several changes to the plan, including:

• The company's lenders can vote to accept or reject a contractual subordination compromise on their plan ballots;

• Super-priority claims of Wachovia Bank NA and all other Le-Nature's lenders who object to confirmation of the plan are to be paid in full or reserved for payment in full in cash on the plan effective date;

• The reorganized company's board will be comprised of four members selected by lenders, two by unsecured creditors and one by subordinated debtholders until all secured claims are paid, then the board will be made up of two members chosen by lenders, four by unsecured creditors and one by subordinated debtholders;

• The company's exit facility lenders must commit to provide the funding needed to sustain the liquidation trust through the earlier of the trust's five-year term or through the resolution of all estate claims and distribution of creditor recoveries; and

• The total cost of the liquidation trust cannot exceed one-third of the total recoveries on estate claims.

Exit facility terms

Le-Nature's plans to enter into a five-year $15 million exit term loan facility, with $12 million to be provided by holders of lenders unsecured claims and $3 million by holders of unsecured senior subordinated notes claims.

Interest will be Libor plus 300 basis points, and Le-Nature's will pay a $200,000 commitment fee.

The company said the exit facility will be repaid from liquidation trust cash.

Le-Nature's, a Latrobe, Pa., manufacturer of flavored bottled water and other beverages, had an involuntary Chapter 7 bankruptcy case filed against it on Nov. 1, 2006. The case was converted to Chapter 11 on Nov. 3, 2006. The case number is 06-25454.

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