Owens Corning bondholders object to exclusivity extension; prepared to file own plan

By Caroline Salls

Pittsburgh, Jan. 27 - Owens Corning's bondholders objected to any further extension of the company's exclusive periods to file a plan of reorganization and solicit votes on the plan because the most recently filed plan lacks bondholder support, and the bondholders are prepared to file their own plan, according to a Friday filing with the U.S. Bankruptcy Court for the District of Delaware.

The company's exclusive periods currently expire on Jan. 31, but Owens Corning has requested that they be extended to July 31.

According to the objection, the bondholders, who collectively hold more than one-third of the outstanding principal amount of Owens Corning pre-bankruptcy bonds, said the company filed its most recent plan without allowing any meaningful input from the bondholders.

The bondholders said that, despite repeated attempts to engage the company in plan negotiations, they were "stonewalled, met with delay and an utter refusal" by Owens Corning to consider plan alternatives.

As a result, the bondholders said the company's fifth amended plan of reorganization does not have their support and a further extension of the exclusive periods is futile and will not result in a consensual or confirmable plan of reorganization.

The objection said the bondholders' proposed plan would contain essentially the same terms as the most recent plan filed by the company, including preserving the $7 billion asbestos claim estimate determined by the District Court, but with two key modifications.

First, the bondholders' plan would provide for the creation of a "FAIR Act Escrow," meaning that an initial payment to the asbestos personal injury trust would be made on the effective date of the plan, with the balance of the asbestos claimants' distributions deposited into escrow pending the possible passage of the Fairness in Asbestos Resolution Act of 2005.

Under the bondholders' proposal, if the FAIR Act were not enacted into law by Jan. 31, 2007, then the distributions held in the FAIR Act Escrow would be released and distributed; but, if the FAIR Act is enacted before the trigger date, then the distributions held in the escrow would not be distributed to the trust, but would be ratably distributed instead to the company's other non-asbestos creditors and thereafter to existing equity.

Second, the bondholders' plan would give asbestos creditors 100% cash recovery, as compared to the 98.8 million shares of common stock of the reorganized company that the asbestos creditors would receive under the fifth amended plan.

The additional cash needed to pay the asbestos creditors would be derived from increasing Owens Corning's senior debt by $1.5 billion, adding to it the bondholders' existing cash distribution and implementing a rights offering for an additional 40 million shares at the plan price of $25 per share to be backstopped by some bondholders.

A hearing on extension of the exclusive periods is scheduled for Monday.

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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