Diamond Glass files Chapter 11 bankruptcy, looks to sell assets to lender agent

By Caroline Salls

Pittsburgh, April 1 - Diamond Glass filed Chapter 11 bankruptcy Tuesday in the U.S. Bankruptcy Court for the District of Delaware, and the company has requested court approval to sell substantially all of its assets to its senior secured lenders through lender agent Guggenheim Corporate Funding LLC, according to a company news release.

In connection with the bankruptcy filing, Diamond Glass has obtained a commitment for $41 million in debtor-in-possession financing from Guggenheim that will provide the company with liquidity during the Chapter 11 process.

Diamond Glass has requested interim access to $7 million of the DIP financing.

The DIP facility includes a $34 million term loan, with a $5.14 million sublimit for letters of credit, and a $7 million revolving credit facility, which will be available for interim DIP funding.

Interest will be Base rate plus 500 basis points.

The DIP facility will mature on the earliest of 90 days, 30 days after the closing date if a final order has not been entered, upon the sale of substantially all of the company's assets and on the effective date of a plan of reorganization.

According to the release, the bankruptcy filing is "the first step in a financial restructuring plan that Diamond Glass expects will result in increased stability to the company and continued service to its network of 217 service centers and 900 mobile installation vehicles in 42 states."

Under the Guggenheim purchase agreement, a significant portion of Guggenheim's debt would be exchanged in part for ownership of the business and related assets.

If Guggenheim is the high bidder at an auction expected to be held in June, the company said it expects the lender agent to carry on Diamond Glass' business.

"Our firm is a healthy, growing business that has faced significant financial challenges stemming from our current debt," Diamond Glass president Bill Cogswell said in the release.

"The Chapter 11 process, and the potential sale of the business to Guggenheim, will provide us with an opportunity to remove a large obstacle to our future success.

"We are optimistic that we will quickly emerge from this restructuring leaner, adequately capitalized, and well-positioned for profitable growth."

Under the sale procedures, Guggenheim's stalking horse bid will be equal to a $34 million credit bid, plus assumed liabilities and the amount of outstanding DIP revolver loans.

In addition, Diamond Glass said Guggenheim has agreed to offer up to $25 million in acquisition and working capital financing to any qualified bidder to support its competing bid to purchase the assets.

In exchange for the acquisition funding, the bidder would have to agree to pay cash for the assets at closing, which would be partially funded by the loan proceeds and partially by a cash investment made by the successful bidder.

All bids must include a $1 million deposit.

Initial overbids must be for at least $200,000 more than the cash purchase price. Subsequent bids must be made in increments of at least $100,000.

If Guggenheim is not the high bidder, Diamond Glass will reimburse 2% of its sale-related expenses.

Diamond Glass is asking the court to schedule the bid deadline for no later than noon ET on June 3, the auction for June 5 and the sale hearing for June 6.

Debt details

According to court documents, the company has $10 million to $50 million in assets and $100 million to $500 million in debt.

Diamond Glass' largest unsecured creditors include:

• Newport Global Advisors, the Woodlands, Texas, with a $16.6 million bondholder claim;

• Plainfield Asset Management LLC, Greenwich, Conn., with a $15.37 million bondholder claim;

• Credit Suisse, New York, with a $3 million bondholder claim;

• Prudential Investment Management LLC, Newark, N.J., with a $3 million bondholder claim;

• Stonegate Capital Management, New York, with a $3 million bondholder claim;

• Patriarch Partners, New York, with a $2.25 million bondholder claim; and

• Lyon (Indosuez), New York, with a $2 million bondholder claim.

Diamond Glass is a Kingston, Pa., automotive glass replacement and repair company. Its Chapter 11 case number is 08-10601.

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