Pierre Foods disclosure statement approved; plan confirmation hearing Dec. 10

By Caroline Salls

Pittsburgh, Oct. 29 - Pierre Foods, Inc. obtained court approval of the disclosure statement for its plan of reorganization, according to a company news release.

The plan confirmation hearing is scheduled for Dec. 10, and the company said it expects to emerge from bankruptcy shortly after the plan is confirmed.

The company filed an amended plan of reorganization and related disclosure statement Tuesday with the U.S. Bankruptcy Court for the District of Delaware that eliminates a credit enhancement originally scheduled to be provided by the plan sponsor and changes the proposed treatment for holders of pre-bankruptcy credit facility claims.

Under the eliminated credit enhancement provision, plan sponsor Oaktree Capital Management LP had agreed to make distributions to general unsecured creditors if the reorganized company informed it that it did not have enough liquidity to make the distributions.

To make the distributions, Oaktree would have purchased distribution rights from the company's senior subordinated noteholders.

As previously reported, funds managed by Oaktree will become the majority owner of Pierre upon confirmation of the plan.

Under the plan, Pierre will convert a portion of its existing pre-bankruptcy secured debt into distributable cash and $85 million of the existing pre-bankruptcy secured debt will be converted into a new mezzanine facility.

The remaining pre-bankruptcy secured debt will be converted into new stock.

Under the original plan, $100 million of first-lien debt was to be converted into 100% of the equity in the reorganized company and $97 million of remaining secured debt was to be restructured into new term loans.

According to the amended disclosure statement, $125 million of the company's senior subordinated note debt will be cancelled.

Unsecured creditors, including holders of the company's senior subordinated notes, can expect a 12% cash recovery to be paid in installments within four months of the plan effective date.

Pierre said it plans to obtain a new exit facility to fund its ongoing operations and pay its plan obligations.

"We are pleased that the court has authorized the solicitation of votes on the consensual plan of reorganization," the company said in the release.

"Pierre is poised to emerge from Chapter 11 as a stronger company, with a solid balance sheet, that is well prepared to operate throughout the current economic cycle and beyond."

At emergence, Pierre said its consolidated debt will be reduced to roughly $141 million, compared with $367 million of debt at the time of the Chapter 11 filing.

Plan creditor treatment

Specific treatment of creditors will include:

• Holders of administrative claims, DIP financing claims, priority tax claims and other priority claims will recover 100% in cash;

• Holders of other secured claims will recover 100% either in cash or through the return of the collateral securing the claim;

• Holders of pre-bankruptcy credit agreement claims will recover 73% to 92% through their share of distributable cash, a mezzanine facility and new stock.

The $85 million mezzanine debt facility will bear interest at 14%, payable in cash or in kind, and will mature eight years from the effective date;

• Holders of unsecured claims will recover 12% in cash;

• Holders of equity interests in Pierre Holding Corp. will receive no distribution under the plan; and

• Intercompany interests will either be retained or replaced with new intercompany interests.

Pierre, a Cincinnati-based manufacturer, marketer and distributor of differentiated food products, filed for bankruptcy on July 15. Its Chapter 11 case number is 08-11480.

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