Owens Corning receives court approval of plan of reorganization

By Jennifer Lanning Drey

Eugene, Ore., Sept. 26 - Owens Corning obtained court approval for its plan of reorganization from the U.S. Bankruptcy Court for the District of Delaware, according to a company news release.

The company expects to emerge from bankruptcy by the end of October, according to the release.

Before the company can emerge, the U.S. District Court for the Eastern District of Pennsylvania must also approve the plan.

"We will emerge as a strong company. Since 2002, we have strengthened our financial performance, including increased sales, improved income from operations and reduced SG&A," said Dave Brown, president and chief executive officer of Owens Corning, in the release.

The agreement assumes a total distribution value of $8.63 billion, which consists of the total enterprise value of $5.86 billion, assumed excess cash of $1.43 billion and Fiberboard trust and asbestos trust assets of $1.49 billion, less existing debt of $55 million and $99 million in assumed value of new shares reserved for employee incentive programs, according to the release.

Owens Corning's exit financing will come from a combination of new equity, new debt financing and existing debt at non-debtor Owens Corning entities, the release said.

The company plans to begin distributions to creditors upon the plan's effective date.

Creditor treatment

Under the plan:

• Bank creditors will receive a full cash recovery, plus interest, amounting to $2.28 billion, calculated as of March 31. Interest will continue to accrue through the effective date;

• Non-bondholder senior and junior unsecured creditors will receive about $249 million in cash;

• Bondholders will receive equity, and asbestos claimants will receive cash and, if the FAIR Act does not become law, some equity;

• Bondholders with aggregate claims of $1.39 billion will receive 26.6 million shares of the reorganized company's common stock. In addition, bondholders and some other general unsecured creditors will have the right to purchase a pro rata share of 72.9 million shares of the reorganized company's common stock at $30 per share via an equity rights offering;

• Owens Corning and Fibreboard asbestos claimants collectively will receive $2.87 billion in cash. The cash will be deposited into a 524(g) trust fund. In addition, Owens Corning will assign all rights to any insurance recoveries to the trust;

• Owens Corning and Fibreboard asbestos claimants also will receive a contingent payment of $1.39 billion in cash and 28.6 million shares of the reorganized company's common stock.

The contingency payment will vest if the FAIR Act is not enacted within 10 days of the conclusion of the 109th Congress. If the FAIR Act is enacted within that timeframe, the contingent note will be cancelled and no further amounts will be transferred to the 524(g) trust;

• Holders of Owens Corning 6.5% Convertible Monthly Income Preferred Securities (MIPS) will receive warrants to purchase 10% of the fully diluted shares of the reorganized company, assuming exercise of all warrants but ignoring management options, at a strike price of $43 per share. The warrants can be exercised within seven years of the effective date;

• Existing holders of Owens Corning common stock will receive warrants to purchase 5% of the fully diluted shares of the reorganized company, assuming exercise of all warrants but ignoring management options, at a strike price of $45.25 per share. The warrants can be exercised within seven years of the effective date;

• In the event that the FAIR Act is enacted into law and the contingency payment to asbestos claimants is not made, existing Owens Corning shareholders and MIPS would have the right to exchange the aforementioned warrants for 14.75% and 5.5%, respectively, of the fully diluted shares of the reorganized company.

Owens Corning, a Toledo, Ohio, building materials company, filed for bankruptcy on Oct. 5, 2000. Its Chapter 11 case number is 00-3837.

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