OCA files revised reorganization plan; increases payments to unsecured creditors

New York, July 21 - OCA, Inc. filed a revised plan of reorganization and related disclosure statement Thursday with the U.S. Bankruptcy Court for the Eastern District of Louisiana, increasing the potential for unsecured creditors.

Under the plan, unsecured creditors will receive $3 million in cash, up from $2.7 million previously for an estimated recovery of 30% instead of 27%. Their total claims are estimated at $9 to $11 million, up from $6 to $10 million previously.

These creditors will also be eligible to receive additional deferred cash payments up to the full amount of their allowed claims.

The formula for when these payments will be made was also changed as part of the revised plan.

Instead of requiring the reorganized company to reach financial milestones in terms of dividends and other cash distributions and pay down $100 million of senior debt, the payments are now triggered by the recovery to senior lenders hitting specified reference amounts. When senior lenders receive $96 million, the first payment of $5 to $7.5 million to unsecured creditors is triggered. The exact payment depends on the claims allowed. Additional payments are triggered when the senior lenders receive $115 million, $150 million and each $25 million after that.

Once the $115 million trigger is hit, payments of $1.15 million will be made to equity and subordinated claims, followed by $3.5 million at the $150 million trigger. For each additional $25 million trigger, the payment is $2.5 million. There are, however, some conditions to these payments.

Distributions of stock to the senior lenders do not count towards the triggers.

Payments on subordinated claims and equity interests will not now be made until unsecured creditors are paid in full.

The official committee of unsecured creditors joined the plan support agreement already executed by the company and the senior lenders.

The revised documents were filed in response to objections. The original plan was filed on May 15.

As previously announced, under the plan, the senior secured debt held by the company's senior lenders will be reduced to $50 million from about $92 million and the senior lenders will receive all of the equity of the reorganized company.

All of the company's outstanding stock will be canceled, and existing shareholders will be eligible to receive $1.5 million in deferred cash payments after distributions and permanent cash paydowns to the senior lenders exceed $115 million, as well as an additional $3.5 million if the distributions and paydowns exceed $150 million.

The company will convert the first $50 million of lender claims into a $50 million four-year term loan. The lenders will share in payments on the loan.

Holders of administrative claims, other secured claims and priority tax claims will recover 100% in cash.

The company said it plans to obtain a $10 million four-year exit financing to repay its debtor-in-possession financing and to be used for working capital.

Interest on the both loans will be Libor plus 600 basis points.

According to the disclosure statement, a doctors' incentive plan will allow doctors of affiliated practices to obtain options or restricted stock grants in reorganized OCA, for up to 10% of the new common stock to be issued.

In addition, the company's management incentive plan will allow the board of directors and members of management to obtain options or restructured stock grants for up to 10% of the new common stock.

Under the plan support agreement, Bart Palmisano Sr. was terminated as chief executive officer.

Chief restructuring officer Michael Gries will serve as interim chief executive officer.

OCA, a Metairie, La., provider of business services to orthodontic and dental practices, filed for bankruptcy on March 14. The Chapter 11 case number is 06-10179.

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