United Subcontractors files bankruptcy; lenders agree to restructuring

By Caroline Salls

Pittsburgh, April 1 - United Subcontractors, Inc. filed Chapter 11 bankruptcy Tuesday in the U.S. Bankruptcy Court for the District of Delaware to implement an agreement in principle with holders of its first-lien loan due in 2012 and second-lien loans due in 2013 on the terms of a financial restructuring, according to a company news release.

"We are very pleased to have reached an agreement with our lenders that will enable us to emerge from Chapter 11 with, in essence, a debt free balance sheet," chief executive officer Paul Lustig said in the release.

"On an operational level, we have a strong foundation in place with a cash position that is more than sufficient to run our business during this period.

"Through this process, we will improve our capital structure and align it with the size of our current business operations."

The proposed restructuring would reduce the company's funded debt by $314 million through a conversion of the bulk of that debt to 100% of the equity in the reorganized company.

In addition, United said the financial restructuring will leave it with a healthy balance sheet and total debt of $22.5 million.

The company said it plans to file its pre-arranged plan of reorganization shortly.

Under the terms of the proposed plan, all letters of credit will remain in place during and after the bankruptcy.

United Subcontractors said its cash on hand, together with the cash generated from ongoing operations, will be sufficient to fund its normal business obligations through the financial restructuring under the terms of a consensual cash collateral agreement with the lenders.

The company also filed a variety of first-day motions to support its employees and suppliers during the restructuring process.

According to court documents, United has $50 million to $100 million in assets and $100 million to $500 million in debt. It did not list any unsecured creditors with claims of $1 million or more.

The company has retained Alvarez & Marsal as its financial and restructuring adviser.

United Subcontractors is an Edina, Minn.-based installer of residential and commercial insulation systems and provider of related products and services. The Chapter 11 case number is 09-11150.

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