Wornick files amended reorganization plan to reflect equity sale-related settlement

By Caroline Salls

Pittsburgh, April 4 - Wornick Co. filed an amended plan of reorganization and related disclosure statement Friday with the U.S. Bankruptcy Court for the Southern District of Ohio to incorporate a sale-related settlement between the company, its pre-bankruptcy lender and its majority senior secured noteholder group.

Specifically, the parties have agreed that if stalking horse bidder Viren Acquisition Corp. is not the high bidder for the equity of the reorganized company, then Wornick's pre-bankruptcy lender will have a $4 million allowed secured claim against Wornick.

However, if Viren is not the high bidder but debtor-in-possession facility lender DDJ Capital Management LLC agrees to provide acquisition financing to the successful bidder, the pre-bankruptcy lender will forego its cash recovery.

If Viren is the high bidder for the equity, the pre-bankruptcy lender will be the given the exclusive right to provide exit financing to reorganized Wornick in lieu of a cash payment.

As a result, Wornick's estates will only be required to make a cash distribution for the pre-bankruptcy lender's redemption fee and make-whole premium claims if Viren is not the high bidder for the equity and DDJ does not provide acquisition funding to the successful bidder.

In addition, under the bidding procedures for the equity sale, which were approved by the court on March 18, Wornick will pay Viren a $1.25 million break-up fee if it is not the high bidder, down from a $2.25 million break-up fee that was originally proposed.

As previously reported, Viren is a new entity formed by members of Wornick's bondholder group.

Treatment of creditors under the plan will include:

• Holders of $12 million in administrative claims, $100,000 in priority tax claims, $35 million in DIP financing claims, $1 million in general unsecured claims and $1.7 million in other priority claims will recover 100% in cash;

• Holders of other secured claims will recover 100% either in cash, reinstatement of their claim or through the return of the collateral securing the claim;

• Holders of $140.22 million in senior secured note claims will recover 36% through their share of $50 million in cash, provided, however, that if the noteholder group is the successful bidder for the company's equity, the cash recoveries that the DDJ entities and the members of the secured noteholder group would be entitled to receive on account of their senior secured note claims will be deemed to have been immediately contributed to the capital of the buyer and credited against the purchase price, or, under the amended plan, if any other holder of a senior secured note claim is the successful bidder or holds an ownership interest in the buyer, that noteholder can choose to direct Wornick to apply the noteholder's cash recoveries toward the purchase price;

• All intercompany claims will be adjusted, continued or discharged with the consent of the equity purchaser;

• Holders of $38 million in TWC note claims, holders of subordinated securities claims and holders of equity interests in non-surviving debtors and Wornick will not receive any distribution under the plan; and

• Holders of equity interests in surviving debtors will retain their interests.

Wornick, a Cincinnati-based food processing and packaging company, made a pre-packaged bankruptcy filing on Feb. 14. Its Chapter 11 case number is 08-10654.

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