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Reunion delivers $30.44 million in sale proceeds to indenture trustee, noteholder distribution delayed
By Caroline Salls
Pittsburgh, May 27 - Reunion Industries, Inc. has made a $30.44 million payment of asset sale proceeds to the trustee of its 13% senior exchange notes due 2003 and 2006, but the trustee said it cannot make subsequent distributions to noteholders at this time, according to a notice sent to noteholders by indenture trustee U.S. Bank NA.
According to the notice, Reunion received court approval to make a payment to senior creditor Steel Partners II, and then to pay the balance of the sale proceeds to the trustee.
However, the payment order gives the company the right to object to the claims of the indenture trustee and noteholder Steel Partners II and to adjust the amount of their claims accordingly. U.S. Bank said Reunion plans to file objections to the trustee and Steel Partners claims.
Since it does not know specifically which of the notes being held by Depository Trust Co. are owned by Steel Partners or by majority noteholder WebFinancial, the trustee said it cannot make any distributions on the notes at this time.
U.S. Bank said it is in discussions with Steel Partners and WebFinancial about obtaining indemnity from them to allow distributions to all noteholders.
The trustee said it is also trying to resolve issues related to a dispute over the proper allocation of the funds paid under the payment order.
U.S. Bank has set a May 16 record date to be used when the noteholder distribution can be made.
Reunion, a Pittsburgh-based manufacturer of metal and plastic products, filed for bankruptcy on Nov. 29, 2007 in the U.S. Bankruptcy Court for the District of Connecticut. Its Chapter 11 case number is 07-50727.
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