Lexington Precision files amended plan, eliminating common stock option

By Caroline Salls

Pittsburgh, Dec. 9 - Lexington Precision Corp. filed an amended plan of reorganization and disclosure statement Monday with the U.S. Bankruptcy Court for the Southern District of New York that eliminates an option for some creditors to receive common stock in the reorganized company.

Under the plan, holders of Lexington's senior subordinated notes will receive $15 million in new 12% subordinated notes due Dec. 31, 2013 and new series C preferred shares. These creditors were previously slated to be given the option to choose shares of new common stock instead of the series C preferred shares.

The par value of the series C preferred shares will be $100, and they will carry a liquidation preference of $100, plus any unpaid dividends.

The dividend rate on the series C preferred stock will be 12%.

The preferred shares can be converted at any time at the option of the holder into a number of shares of common stock equal to $100 divided by the price per share at which the company's 13% junior subordinated notes, series B preferred stock and 12% senior subordinated notes were converted or had the option to convert on the plan effective date.

In addition, the company can redeem the series C preferred stock at any time at 100% of the liquidation preference with 90-days' written notice.

The series C preferred stockholders will have the right to select two members of the reorganized company's board of directors if there are at least 100,000 shares issued and outstanding, and they can select one member of the board if there are at least 50,000 shares issued and outstanding.

Holders of Lexington's senior subordinated notes will now receive series C preferred shares instead of new subordinated notes and a choice between common stock and preferred shares.

Holders of Lexington's junior subordinated notes will still receive shares of new common stock.

Plan creditor treatment

Treatment of creditors will include:

• Holders of administrative expense claims, professional compensation and reimbursement claims, indenture trustee fee claims, debtor-in-possession loan claims, priority tax claims, convenience claims and other priority claims will be paid in full in cash;

• Holders of CapitalSource secured claims, CSE secured claims and secured tax claims will be paid in full in cash;

• Holders of other secured claims will receive either full payment in cash, the proceeds of the sale of the collateral securing the claims or the return of the collateral, or the claims will be reinstated;

• Holders of senior subordinated note claims will receive shares of series C preferred stock;

• Holders of junior subordinated note claims will receive shares of common stock equal to the value of the claims;

• Holders of general unsecured claims will receive cash equal to 10% of the claim on the plan effective date and nine cash payments each equal to 10.75% of the claim beginning three months after the effective date;

• Asbestos-related claims will be reinstated; provided, however, that recovery on any asbestos-related claim will be limited to proceeds of insurance policies and claimholders will be permanently enjoined from taking any action to collect, recover or receive payment on the claim other than the insurance policies;

• Holders of series B preferred stock interests will receive Lexington Precision common stock equal to the value of the preferred stock interests; and

• Equity interests will be unaltered but will be diluted because of the increase in the number of common shares.

Funding talks

According to the amended disclosure statement, Lexington is now in discussions with its debtor-in-possession facility lenders for a new second-lien loan that would accrue interest at Libor plus 700 basis points, as well as the issuance of five-year warrants that would allow the lenders to purchase new common stock in the reorganized company.

Lexington Precision, a New York-based manufacturer of rubber and metal components for the automobile and medical devices industries, filed for bankruptcy on April 2, 2008. Its Chapter 11 case number is 08-11153.

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