Owens Corning emerges from Chapter 11 bankruptcy with $1.6 billion exit facility

By Caroline Salls

Pittsburgh, Oct. 31 - Owens Corning emerged from bankruptcy Tuesday when its plan of reorganization took effect, according to a company news release.

"This is an exciting day for Owens Corning," president and chief executive officer Dave Brown said in the release.

"We have met the commitments that we made to our creditors and asbestos claimants at the start of this process."

As part of the exit plan, the company got a new $1.6 billion five-year exit financing credit facility (Baa3/BBB-) consisting of a $600 million term loan and a $1 billion revolver, with both tranches priced at Libor plus 75 bps, according to a market source.

During syndication, the term loan was downsized from $1.4 billion as the company completed a $1.2 billion bond offering.

Citigroup and Bank of America acted as the lead banks on the deal.

The company said it will immediately begin the process of making distributions to its financial creditors and to a trust that will resolve its current and future asbestos liability.

"We are emerging from Chapter 11 in a strong operational and financial position," Brown said in the release.

"During the past six years, we have continued to grow our businesses around the world and have strengthened our financial performance. We are pleased to be emerging as an investment-grade company."

On June 29, Owens Corning obtained court approval of a plan support agreement and equity commitment agreement with its key creditors.

Under those agreements, existing Owens Corning stock will be canceled and 131.4 million shares of new stock will be issued with a plan value of $3.942 billion.

Plan 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;

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

• 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.

New stock trading

As previously reported, Owens Corning's new common stock was approved for listing on the New York Stock Exchange last week under the ticker symbol "OC."

Owens Corning spokesman Jason Saragian confirmed Tuesday that the stock will begin "regular-way" trading on Wednesday.

The common shares began trading on a "when-issued" basis on Oct. 23.

Owens Corning, a Toledo, Ohio, building materials company, filed for bankruptcy on Oct. 5, 2000 in the U.S. Bankruptcy Court for the District of Delaware. Its Chapter 11 case number is 00-3837.

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