Constar International Inc. and its units seek authority from the U.S. Bankruptcy Court for the District of Delaware to obtain a postpetition letter of credit facility in the amount of $10,000,000 from Wells Fargo Capital Finance, LLC.
Jamie L. Edmonson, Esq., at Bayard, P.A., said in a court filing that the continuing availability of letters of credit to guarantee, where necessary, Debtors' obligations to its vendors and suppliers is critical to Debtors' operations. However, according to Mr. Edmonson, by entering into a the L/C facility agreement, the Debtors are not taking new debt, they are simply replacing one prepetition letter credit facility that was provided by General Electric Capital Corp.
While the Debtors' revolving credit facility with GE Capital -- of which $29.4 million was outstanding as of the bankruptcy filing -- was refinanced and paid shortly with the DIP facility provided by noteholders that are supporting the pre-negotiated plan, the Debtors kept in place those undrawn letters of credit outstanding under the prepetition credit facility. The first of the prepetition L/Cs will shortly mature and GECC is unwilling to reissue the L/Cs when they mature.
Wells Fargo -- who the Debtors intend will serve as their exit financier -- is willing to step in and replace GE Capital as the provider of letters of credit. Accordingly, Debtors now seek to
replace the letter of credit facility under the Prepetition Facility with a letter of credit facility provided by Wells Fargo.
The Debtors will pay to Wells Fargo on the first business day of each calendar month the rate of 1% percent per annum on the aggregate face amount of all LCs outstanding.
Pre-Negotiated Chapter 11 Plan
Constar International filed for Chapter 11 in January with a Chapter 11 plan negotiated with 75% of holders of senior secured floating rate notes.
The restructuring plan calls for, among other things, a reduction
of the Company's current debt level of $220 million by roughly
$135 million to $150 million, with a significant corresponding
reduction in cash interest.
The Restructuring Support Agreement can be terminated by noteholders if the Debtors failed to obtain confirmation of the Chapter 11 plan by May (130 days after the Chapter 11 filing).
As of the Petition Date, the Debtors had outstanding debt in the
aggregate principal amount of roughly $251 million, consisting
primarily of roughly (a) $29.4 million under their senior
secured credit facility, including accrued and unpaid interest,
and (b) $221.4 million in secured floating rate notes due 2012
(including accrued interest).
Pursuant to the proposed Plan of Reorganization, Noteholders will
convert 100% of the face amount of the current notes into new term
debt in the face amount of US$70 million and convertible preferred
stock of US$30 million, and will become the majority owners of the
new common stock. Under the proposed plan, the Company's general
unsecured claims will be converted to equity, and the current
equity will be cancelled. The Company anticipates that the
restructuring will be completed by late spring of 2011, subject to
court approval.
A copy of the Pre-Arranged Plan is available for free at:
http://bankrupt.com/misc/Constar_Disc_Statement_2011.pdf
A copy of the disclosure statement explaining the Plan is available for free at:
http://bankrupt.com/misc/Constar_Prearranged_Plan_2011.pdf
About Constar International
Philadelphia, Pennsylvania-based Constar International Inc. --
http://www.constar.net/ -- produces and supplies polyethylene
terephthalate plastic containers for food and beverages.
Constar filed for Chapter 11 protection in December 2008 (Bankr.
D. Del. Lead Case No. 08-13432), with a pre-negotiated Chapter 11
plan. The plan, which reduced Constar's debt load by roughly
$175 million, became effective on May 29, 2009. Attorneys at
Bayard P.A., and Wilmer Cutler Pickering Hale and Dorr LLP
represented the Debtor in the case.
Due to operating losses caused by a significant decline in demand
for its products from Pepsi-Cola Advertising and Marketing Inc.
and other customers, Constar and its affiliates returned to
Chapter 11 on January 11, 2011 (Bankr. D. Del. Case No. 11-10109),
with a Chapter 11 plan negotiated with holders of 75% of the
holders of $220 million in senior secured floating-rate notes.
Andrew Goldman, Esq., and Dennis Jenkins, Esq., at Wilmer Cutler
Pickering Hale and Dorr LLP, serve as the Debtors' general
bankruptcy counsel. Jamie Lynne Edmonson, Esq., and Neil B.
Glassman, Esq., at Bayard, P.A., serve as co-counsel to the
Debtors. PricewaterhouseCoopers serves as the Debtors'
independent auditors and accountants. Kurtzman Carson Consultants
LLC serves as the Debtors' claims agent.
Patrick J. Nash Jr., Esq., and Paul Wierbicki, Esq., at Kirkland &
Ellis LLP, serve as counsel to the noteholders that have signed
that plan support agreement.
The Debtors disclosed $418 million in total assets and
$414 million in total debts as of Sept. 30, 2010.
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