Oglebay Norton senior subordinated noteholders to get estimated 24% recovery

By Jeff Pines

Washington, May 24 - Holders of Oglebay Norton's $100 million of 10% senior subordinated notes due 2009 will get an estimated recovery of only 24%, according to the company's disclosure statement filed with the U.S. Bankruptcy Court for the District of Delaware.

Cleveland-based Oglebay Norton estimated the claims for the notes are about $105.6 million, including interest.

The statement said those claimants will get a pro rata share of 2,928,571 common shares of the reorganized company.

Investors holding $40.32 million of the subordinated notes agreed in February to buy $80 million of preferred stock in the reorganized company.

On May 14, Oglebay Norton registered to sell rights to buy 8 million shares of convertible preferred stock in the reorganized company. For each $1,000 of principal in claims, a holder will get a right to buy 80 convertible preferred shares for $800. The shares will be convertible based upon by a formula. It is reserving 15 million common shares for conversion purposes.

These investors also agreed to buy 500,000 more shares for $5 million.

The dividends on the new preferred shares will be payable quarterly at an annual rate of 13.75%. For the first three years, the dividends will be paid by accreting and adding the amount per share to the liquidation preference. After that, dividends will be paid in cash.

Oglebay Norton will use the net proceeds along with cash from its credit line to pay the claims of its 18% senior secured noteholders.

The disclosure statement does not give an estimated recovery for senior secured noteholders; however, they will be able to choose from receiving 104% of their original principal plus interest at the non-default rate in cash, or they may choose a litigation reserve option.

The litigation option allows the secured noteholder to take the company to court to be paid for their notes' principal and the default interest. The money to pay these claims would come from a rights offering or some other securities offering except for a sale of debt securities.

There is an estimated $91.32 million of these claims outstanding. This includes $75.5 million in principal, $8.43 million in payment-in-kind interest and $7.9 million in cash interest.

Pre-petition common stockholders will get a pro rata share of 500,000 warrants to buy common stock at $10 per share.

Oglebay Norton, which mines and transports minerals, filed for bankruptcy on Feb. 23. Its Chapter 11 case number is 04-10558.

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