Linens 'n Things files reorganization plan; senior noteholders to own reorganized company

By Caroline Salls

Pittsburgh, Aug. 29 - Linens Holding Co. filed its plan of reorganization and related disclosure statement Friday with the U.S. Bankruptcy Court for the District of Delaware.

The company said its reorganization process has the support of its senior lenders and its official committee of unsecured creditors, as well as an informal committee of the holders of its senior notes.

According to a company news release, the company expects to emerge from bankruptcy in early 2009.

Under the plan, Linens' senior lenders will be paid in full and its senior noteholders will convert a majority of their debt into substantially all of the ownership of the reorganized company.

Unsecured creditors will receive warrants to purchase common stock in the new company.

Treatment of creditors will include:

• Holders of debtor-in-possession facility claims, administrative claims, priority tax claims and other priority claims will be paid in full in cash;

• Holders of other secured claims will receive either cash or the collateral securing the claim;

• Holders of senior note claims will receive the equity in the reorganized company and a $100 million secured note requiring no payments for the first two years after the plan effective date;

• Holders of unsecured claims will receive warrants to purchase new common stock; and

• Holders of equity interests will receive no distribution under the plan.

Linens said it plans to obtain $500 million in exit financing, including an up to $250 million letter-of-credit subfacility.

In addition, the company said Robert J. DiNicola has resigned from his post as executive chairman. He has agreed to remain a member of the board of directors and serve as a non-executive chairman of the board, pending solicitation and approval of the reorganization plan.

Linens 'n Things, a Clifton, N.J., home furnishings specialty retailer, filed for bankruptcy on May 2. Its Chapter 11 case number is 08-10832.

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