Masonite International Inc. today announced that it has reached an agreement in principle with members of a steering committee representing its senior secured lenders and representatives of an ad-hoc committee representing holders of its senior subordinated notes due 2015 on the terms of a restructuring plan. Company officials say the restructuring plan will enable it to significantly reduce its outstanding debt and create an appropriate capital structure to support its long-term strategic plan and business objectives.The company currently is soliciting support for the its broader lender and bondholder constituencies. If approved by the requisite percentages of the lender and bondholder groups and implemented as proposed, the restructuring plan will enable Masonite to reduce its total funded debt by nearly $2 billion, from $2.2 billion today to up to $300 million upon consummation of the plan, according to a press release issued by the company. The company says this debt reduction also would reduce annual cash interest costs by approximately $145 million and provide Masonite with liquidity and financial flexibility.

“We are very pleased to have reached an agreement in principle on a plan that will allow us to reduce our debt substantially and put Masonite in a stronger, financially healthier position for the future,” says Fred Lynch, president and chief executive officer of Masonite. “With an appropriately sized capital structure and greater financial flexibility, along with our excellent market position, strong brand, and industry-leading products, we believe we will be well-positioned to take advantage of market opportunities and grow our business over the long term.”

Under terms of the agreement in principle, 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.

The company anticipates that the restructuring would be implemented by means of a “pre-negotiated” plan of reorganization filed in conjunction with voluntary Chapter 11 proceedings in the United States and similar proceedings under the Companies’ Creditors Arrangement Act (CCAA) in Canada.

Masonite fully expects to continue to operate in the normal course of business during the restructuring process. All of the Company’s manufacturing and distribution facilities around the world will remain open and continue to serve customers in the normal course. Masonite’s subsidiaries and affiliates outside of North America are not expected to be adversely impacted by the legal proceedings, according to the release.

Company officials say the proposed restructuring plan further provides for all trade creditors to be “unimpaired,” which means that trade suppliers and vendors would be paid in full under the plan. Masonite intends to seek authorization from the U.S. and Canadian courts to continue to pay trade creditors under normal terms in the ordinary course of business.

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  1. […] that it was considering restructuring and was soliciting support from its lenders and bondholders. (CLICK HERE for related […]

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