O'Sullivan files plan of reorganization; noteholders to recover stock, all new notes

By Caroline Salls

Pittsburgh, Oct. 17 - O'Sullivan Industries Holdings, Inc. filed its plan of reorganization and related disclosure statement Saturday with the U.S. Bankruptcy Court for the Northern District of Georgia and requested approval for $35 million in debtor-in-possession financing from CIT Group/Business Credit, Inc. and GoldenTree Asset Management, LP.

The company made a prepackaged Chapter 11 filing Friday, and according to a news release, the plan has the support of holders of 83% of its senior secured notes.

Under the proposed plan, holders of O'Sullivan's 10.63% senior secured notes will receive 82.8% recovery in the form of 10 million shares of new O'Sullivan Holdings common stock and $10 million in new secured notes.

The company plans to issue 10 million shares or $79.4 million in new common stock and $10 million in new notes.

Holders of other secured claims will receive 100% recovery in cash, the collateral securing the claim or reinstatement of the claim.

General unsecured creditors, including holders of O'Sullivan Industries, Inc.'s 13 3/8% senior subordinated notes, will receive no recovery under the plan.

All outstanding debt obligations and all outstanding shares of the company's preferred stock, common stock, warrants and options will be cancelled and holders will receive no distribution.

DIP facility terms

The DIP facility, together with funds from operations, is expected to provide the liquidity necessary to enable O'Sullivan to meet its obligations to its suppliers, customers and employees during the Chapter 11 reorganization process.

The DIP includes a revolving credit facility of up to $30 million, with a $20 million letter-of-credit subline, from CIT. The DIP also will include an up to $5 million term loan from GoldenTree.

The term loan, which essentially will serve as a backstop for the revolver, will be triggered if availability under the revolver is less than $2.6 million or the total amount of loans outstanding under the revolver, undrawn letters of credit, reimbursement obligations under letters of credit on which demand for payment has been made and if the face amount of letters of credit authorized by CIT exceeds $29.5 million.

All borrowings under the term loan will be in $1 million increments.

Over-advances on the revolver cannot exceed $4.5 million.

Interest on the revolver will be Libor plus 400 basis points through April 1. After that, the revolver interest will be based on excess availability.

If the average borrowing availability for a three-month period is $10 million or more, the interest rate will be Libor plus 300 basis points; if the availability is between $7.5 million and $9.99 million, the interest will be Libor plus 350 basis points; if the availability is between $5 million and $7.49 million, the interest will be Libor plus 400 basis points and if the availability is less than $5 million, the interest will be Libor plus 450 basis points.

Interest on the term loan will be Libor plus 850 basis points.

O'Sullivan will be required to pay a $350,000 commitment fee to CIT and a $100,000 commitment fee to GoldenTree.

The revolver line-of-credit fee is 50 basis points, and the letter-of-credit fee is Libor plus 25 basis points.

O'Sullivan also plans to obtain a $40 million to $50 million exit facility. The terms of the exit facility were not yet available. The maturity on the notes will be six months longer than the exit facility maturity, and the interest will be 150 basis points higher than the interest on the facility.

On Friday, the company also requested court approval to retain Lazard Freres & Co. LLC as the financial adviser for its Chapter 11 case.

O'Sullivan is a Lamar, Mo., manufacturer of ready-to-assemble furniture. Its Chapter 11 case number is 05-83076.

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