Owens Corning: court approval for USD 2.2 billion rights offering

Owens Corning has gained court approval for a USD 2.2 billion rights offering to help it fund its proposed reorganization plan, and is now seeking authorization for USD 2.4 billion in exit financing.

Owens Corning has gained court approval for a USD 2.2 billion rights offering to help it fund its proposed reorganization plan, and is now seeking authorization for USD 2.4 billion in exit financing. Visiting Judge Judith K. Fitzgerald in the US Bankruptcy Court for the District of Delaware approved the rights offering on Thursday, 29 June 2006. J.P. Morgan Securities Inc. agreed to back the offering to ensure Owens Corning received the full USD 2.2 billion in proceeds. For its services, J.P. Morgan would receive a fee of USD 100 million. The rights offering is part of Owens“ proposed reorganization plan, which would allow bondholders and certain other general unsecured creditors to purchase a pro-rata share of 73 million shares of the reorganized company“s common stock at USD 30 per share. The firm will also seek court approval for a USD 2.4 billion in exit financing, with Citigroup Global Markets Inc. and Bank of America NA serving as joint lead arrangers. The exit financing would consist of a USD 1.4 billion term loan and a USD 1 billion revolving credit facility. A hearing on the exit financing is scheduled for 24 July 2006. Before then, Judge Fitzgerald is to consider Owen“s disclosure statement on 10 July 2006. A confirmation hearing is set for 18 September. After nearly six years in Chapter 11, Owens Corning said on 10 May 2006 that it has developed a consensual reorganization plan that would deposit up to USD 5.2 billion of cash, insurance rights and stock in a trust fund for its asbestos creditors. However, if Congress passes asbestos reform legislation (the FAIR act) to create national trust fund before the end of its session in October 2006, Owens Corning“s asbestos claimants would receive USD 2.9 billion, and the company would assign all rights to any insurance recoveries to the trust. If the legislation does not pass, the asbestos creditors would also receive an additional contingent payment of USD 1.4 billion in cash and 29 million shares of the reorganized company“s common stock. According to the plan, Owens“ bank lenders would also receive 100% recovery of USD 2.3 billion in cash, including interest. Non-bondholder senior and junior unsecured creditors will get about USD 249 million in cash. Holders of Owens“ 6.5% convertible monthly income preferred securities (MIPS) would receive warrants to purchase 10% of the fully diluted shares of the reorganized company at an exercise price of USD 43 a share. The warrants can be exercised within seven years of the effective date. Meanwhile, holders of Owens“ common stock, which would be cancelled upon emergence, should receive warrants to purchase 5% of the fully diluted shares of the reorganized company at an exercise price of USD 45.25 a share. The warrants can be exercised within seven years of the effective date. If the FAIR Act becomes law and the contingency payment to asbestos claimants is not made, Owens shareholders and holders of MIPS would have the right to exchange the aforementioned warrants for 14.75% and 5.5%, respectively of the fully diluted shares of the reorganized company. Owens filed for bankruptcy on 5 October 2000.