Oglebay Norton should be sold through Chapter 7 liquidation, Nufleet says; promises better recoveries

New York, Oct. 4 - Oglebay Norton Co.'s Chapter 11 case should be converted to a Chapter 7 case and the company sold in order to give creditors a better recovery, according to a motion from Nufleet LLC filed with the U.S. Bankruptcy Court for the District of Delaware on Saturday.

Nufleet said that the offer from it and a consortium of other buyers will provide more return for bondholders but has been consistently ignored by the company.

Nufleet, a creditor of Oglebay, asked the court to "terminate the embarrassing spectacle of special interests indulging their avaricious appetites at the expense of common creditors in this case by converting this case to a liquidation case under Chapter 7 and appointing a trustee."

Oglebay's own reorganization plan - scheduled for more confirmation hearings on Oct. 4 and 5 - has met with objections from Nufleet and some mass tort claimants, Nufleet noted. It added that the plan does not meet the best interests of creditors test.

Nufleet, which owns Oglebay bonds, said the value of the distribution to creditors under the company's plan has been "conclusively established" at between 24 and 27.7 cents on the dollar.

Meanwhile, the offer from its consortium would pay 41.9 cents on what it calls a conservative analysis, and would be reduced to 38.2 cents if $5.4 million of M&A fees were allowed by the court, Nufleet said, still well above the recovery in Oglebay's plan. The only escape clauses are for "catastrophic environmental problems" and on-site due diligence - the latter something that Oglebay has refused for months, according to Nufleet.

The cash portion of Nufleet's offer is $496.57 million plus the assumption of $50 million in benefit liabilities.

Nufleet argued that Oglebay's opinion that a liquidation would result in substantial litigation and a distressed recovery of only $159 to $216 million "defies common sense."

It argued the real reason for Oglebay's opposition is that a group of institutional investors wants "to purchase absolute control of a half-billion dollar enterprise for $85 million, with the cooperation of inside creditors and at the expense of every other constituency."

Under Oglebay's plan, creditors who participate in an $85 million offering of preferred stock will get 74.4% of the company's equity, according to Nufleet's filing. Other bondholders will receive 25.6% of the equity, without the "goodies" attached to the preferred stock.

By Dec. 31, 2008, the accretion of the preferreds would give the holders 83.9% of the equity versus 16.1% for other creditors, Nufleet said.

Oglebay Norton, a Cleveland-based minerals and aggregates company, filed for bankruptcy on Feb. 23, 2004. Its Chapter 11 case number is 04-10558.

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