Wornick committee of ad hoc noteholders objects to debt restructuring agreement

By Jennifer Lanning Drey

Portland, Ore., March 7 - An ad hoc committee of Wornick Co. senior secured noteholders objected to the restructuring agreement made between the company and its senior secured working capital lender and holders of roughly 85% of its senior secured notes, according to a Friday filing with the U.S. Bankruptcy Court for the Southern District of Ohio.

Under the company's agreement with the noteholders, Viren Acquisition Corp., a new entity formed by members of the bondholder group, will purchase the equity of the reorganized company.

In the objection, the ad hoc committee said Wornick's Chapter 11 filing was made "for the sole purpose of implementing a debt for equity swap disguised as a sale of assets or equity."

According to the committee, the plan benefits 85% of the holders of Wornick's senior secured notes, the DDJ Capital Management, LLC noteholders, and pre-bankruptcy lender DDJ Total Return Loan Fund LP, but excludes similarly situated senior secured noteholders, including members of the ad hoc committee.

As proposed, Wornick's motion and bidding procedures are the first step to implementing the equity sale to the purchaser under the plan or, potentially, through an asset sale, the committee said.

By proposing an equity sale or asset sale, Wornick has suggested a "toggle plan," that seeks to ensure that if its attempts at the equity sale are unsuccessful and the plan is not confirmed, they will still own 100% of the reorganized businesses by closing on an asset sale outside of the plan, the committee said in the filing.

Additionally, Wornick has not justified selling substantially all of its assets under bankruptcy law, and the current plan ensures that there will be no competitive bidding for the company's assets because it is structured to impede and frustrate other bidders, the ad hoc committee argued.

Under Wornick's proposed bidding procedures, if Viren is not the high bidder for the equity, Wornick will pay it a $2.25 million break-up fee and reimburse up to $1 million of its sale-related expenses.

The ad hoc committee believes any sale of the company's assets should occur through a plan of reorganization.

Wornick is a Cincinnati-based food processing and packaging company. Its Chapter 11 case number is 08-10654.

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