Lenox files Chapter 11 bankruptcy; secured lenders agree to buy assets

By Caroline Salls

Pittsburgh, Nov. 24 - Lenox Group Inc. filed for Chapter 11 bankruptcy Sunday in the U.S. Bankruptcy Court for the Southern District of New York with an agreement in hand to potentially sell substantially all of its assets to its existing term loan lenders, according to a company news release.

While in Chapter 11, the company said it will continue the process for the sale of its business.

As part of the sale efforts, Lenox and its existing term loan lenders have entered into a plan term sheet and plan support agreement under which the term lenders will form a new entity to purchase substantially all of the company's assets in exchange for cancellation of some of their secured loans, subject to higher or better offers.

"We want to assure our employees, customers, vendors and communities that Lenox is conducting business as usual," chief executive officer Marc Pfefferle said in the release.

"While fundamentally sound, our business has been significantly impacted by economic conditions and excessive debt levels incurred at the time Department 56 purchased Lenox, Incorporated in 2005.

"After exhausting all other possibilities and considering the current state of credit markets and the economy, we determined that the best way to complete a restructuring of the balance sheet and protect our franchise value was to pursue a sale of the company under court approval in a Chapter 11 proceeding. This process will give the company flexibility to operate on a normalized basis, dispose of unproductive assets, reduce operating costs and strengthen its balance sheet."

The company said it expects to "proceed quickly" through the bankruptcy process.

DIP loan terms

In connection with the filing, the company has obtained a commitment for $85 million in debtor-in-possession financing from its current revolving lender group. UBS AG, Stamford Branch is the administrative agent.

According to the release, the DIP facility will provide a continuing source of funds to enable Lenox to satisfy customary obligations associated with ongoing operations of its business, including the timely payment of employee obligations, material purchases, normal operating expenses and other obligations.

The DIP facility will include a $15 million sublimit for letters of credit and a $15 million sublimit for swingline loans. A total of $40 million of the loan will be available on an interim basis.

Interest will be Libor plus 400 basis points.

The DIP loan will mature on the earliest of one year from closing, upon the sale of substantially all of the company's assets, on the effective date of a plan of reorganization and upon conversion of Lenox's bankruptcy case.

The company will pay a 2% closing fee, a 2.5% back-end fee, a $100,000 administrative agency fee and a $100,000 collateral agency fee.

Debt details

According to court documents, Lenox had $264 million in assets and $238 million in debt as of Oct. 25.

The company's largest unsecured creditor is Pension Benefit Guaranty Corp. with a $9.97 million pension liability claim. No other unsecured creditors were listed with claims of $1 million or more.

Lenox said it expects the OTC Bulletin Board to temporarily halt trading in its stock pending receipt of additional information on Lenox's financial condition and reorganization plans.

The company's financial adviser is Berenson & Co.

Lenox is an Eden Prairie, Minn.-based tableware, collectibles and other giftware products company. Its Chapter 11 case number is 08-14679.

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