MMFX Technologies' disclosure statement OK'd; plan covers two outcomes

By Lisa Kerner

Charlotte, N.C., June 7 - MMFX Technologies Corp.'s disclosure statement was approved by the U.S. Bankruptcy Court for the Central District of California on Tuesday, according to an attorney familiar with the case.

As previously reported, in early May MMFX, its official committee of unsecured creditors, Fourth Third LLC and Investment Funding, Inc. filed a joint plan of reorganization and disclosure statement for MMFX's Chapter 11 bankruptcy case.

The plan covers two potential reorganization scenarios.

MMFX will continue its current process of seeking bids to invest in, license or acquire some or all of its assets.

If there is a successful bid under the investment banking process, MMFX will restructure under scenario A.

Bids will be due by July 15, and the successful bid must be chosen by July 20.

Without court approval of a successful bid by July 22, MMFX will restructure under scenario B, under which Fourth Third and Investment Funding would convert their general unsecured claims to equity and provide an exit facility.

MMFX said the exit facility would provide a minimum of $1 million to fund payment of general unsecured claims, priority tax claims and priority non-tax claims. The company said this would be enough to make a minimum 60% distribution to general unsecured creditors.

However, if the exit facility does not allow the general unsecured claims to be paid in full, the committee has the right to negotiate with Fourth Third and Investment Funding to increase the amount of the exit financing.

Creditor treatment

Treatment of creditors will include:

• Holders of administrative claims, priority tax claims, priority non-tax claims and secured claims will be paid in full;

• Holders of general unsecured claims will be paid in full under scenario A, or be paid using exit financing proceeds under scenario B;

• Under scenario A, Fourth Third and Investment Funding will receive discounted payoffs of $45.5 million and $8.5 million, respectively, in full satisfaction of their claims provided that the amounts are received by Aug. 5.

Under scenario B, Fourth Third and Investment Funding and any other holder of a general unsecured claim that elects equity in lieu of a cash distribution will receive a share of 100% of the new common interests in the reorganized company;

• Intercompany claims will either be reinstated or discharged and extinguished at the company's discretion under scenario A and at Fourth Third's discretion under scenario B; and

• Under scenario A, to the extent provided by the successful bid, interest holders may receive no recovery or may retain or be paid for some or all of their interests.

Under scenario B, interest holders will receive no recovery.

MMFX, an Irvine, Calif.-based materials science company, filed for bankruptcy on Dec. 14, 2010. The Chapter 11 case number is 10-10083.

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