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Owens Corning U.S. Trustee objects to settlement agreement, equity commitment backstop fee
By Caroline Salls
Pittsburgh, June 14 - Owens Corning's U.S. Trustee objected to the company's plan support agreement and related equity commitment agreement fees, according to Wednesday filings with the U.S. Bankruptcy Court for the District of Delaware.
The trustee said the plan support agreement is an improper solicitation of a vote on the company's sixth amended plan of reorganization, calling the support agreement "essentially a lock-up agreement to secure the votes of certain bondholders to the sixth amended plan."
According to the objection, bankruptcy law prevents the solicitation of votes on a plan of reorganization before court approval of a written disclosure statement.
In addition, U.S. Trustee Kelly Beaudin Stapleton said she does not object to the equity commitment agreement, but rather to the $100 million backstop fee to be paid to J.P. Morgan Securities Inc. under the agreement.
The trustee said both the non-refundable, unconditional nature of the fee and the amount of the fee may be unreasonable because no escrow of backstop funds is being made, a group of investors, rather than one investor, is taking part in this transaction, and there appear to be no absolute, "hell or high water" provisions that protect the company.
Also, the trustee said the provision that calls for payment of not only the $100 million fee, but also other expenses, attorneys fees and professional fees "amounts to piling on" and is unreasonable.
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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