Masonite Files for Chapter 11 in United States; Petitions to Reorganize Under the Companies’ Creditors Arrangement Act (CCAA) in CanadaMarch 16th, 2009 by DWM Magazine
Masonite International has begun its previously announced restructuring and today filed a voluntary petition for reorganization under Chapter 11 in the U.S. Bankruptcy Court in Wilmington, Del. In addition, the company filed to reorganize under the Companies’ Creditors Arrangement Act (CCAA) in Canada in the Ontario Superior Court of Justice.
The company’s North American subsidiaries and affiliates also were included in the filings, according to a statement issued by the company today.
The group announced last week that it was considering restructuring and was soliciting support from its lenders and bondholders. (CLICK HERE for related story.)
“We are very pleased to have received strong support from our lender and bondholder groups for our debt restructuring plan,” says Fred Lynch, president and chief executive officer of Masonite. “We are ahead of schedule and intend to proceed quickly and expeditiously to implement the plan, which would reduce Masonite’s debt by nearly $2 billion and put our company in a stronger, financially healthier position for the future. We expect to emerge from this process with an appropriate capital structure to support our long-term business objectives and with increased financial flexibility both to navigate the current industry challenges and to take advantage of future growth opportunities.”
If the restructuring plan is implemented as proposed, company officials say the plan will enable Masonite to reduce its outstanding debt by nearly $2 billion, from $2.2 billion today to up to $300 million upon consummation of the plan, and reduce its annual cash interest costs by approximately $145 million.
Masonite plans to continue to operate as usual during the restructuring process.
Under the proposed plan, all trade creditors would be “unimpaired,” which means that trade suppliers and vendors would be paid in full. To this end, the company has filed motions seeking authorization from the U.S. and Canadian courts to continue to pay trade creditors under normal terms in the ordinary course of business.
As of March 12, 2009, Masonite had more than $150 million in cash on hand that will be available to satisfy obligations associated with conducting the company’s business in the ordinary course.
Under the terms of the proposed restructuring plan, Masonite’s existing Senior Secured Obligations would be converted on a pro rata basis, subject to the election of each existing holder of Senior Secured Obligations, into (i) a new senior secured term loan of up to $200 million, (ii) a new second-lien PIK Loan of up to $100
million, and/or (iii) 97.5 percent of the common equity of a reorganized Masonite subject to dilution for warrants issued to the Senior Subordinated Noteholders and management equity and/or options. Senior Subordinated Notes would be converted to 2.5 percent of the common equity in Masonite plus warrants for 17.5 percent of the common stock of the company, subject to dilution for management equity and/or options, according to the company.