Ciena Capital files revised plan; secured claim treatment tweaked

By Caroline Salls

Pittsburgh, Aug. 2 - Ciena Capital LLC filed an amended plan of reorganization and disclosure statement on Friday with the U.S. Bankruptcy Court for the Southern District of New York.

The amended plan includes False Claims Act and Small Business Administration settlements recently approved by the court.

As previously reported, Ciena said the disputes with the SBA and the False Claims Act litigation were two of the principal factors that drove the filing of its Chapter 11 bankruptcy case.

Under the False Claims Act settlement, the United States and related parties James R. Brickman and Greenlight Capital, Inc. will dismiss a lawsuit in exchange for Business Loan Center granting the United States an allowed general unsecured claim under which it will receive two actual cash distributions totaling $10.1 million.

One of the distributions will be for $8.2 million and will be paid in partial settlement of the lawsuit, and the second will be for $1.9 million in full satisfaction of claims for lawsuit-related costs and fees.

Under the SBA settlement, the parties will provide mutual releases, and the SBA will vote in favor of and support confirmation of Ciena's plan of reorganization.

Creditor treatment

Treatment of creditors under the amended plan will include:

• Holders of administrative claims, priority tax claims and priority non-tax claims will be paid in full in cash, as under the original plan;

• Holders of pre-bankruptcy secured lender claims will receive a share of a restructured credit facility and 100% of the interests in the reorganized company, as under the original plan;

• Holders of other secured claims will receive a promissory note payable in 12 monthly installments, with interest at a rate of the higher of the contractual rate and 6%.

Under the previous plan, these creditors were slated to either have their claims reinstated, be paid in full in cash or receive the collateral securing the claim;

• Holders of unsecured claims will either receive a portion of a settlement fund if they do not exercise a release opt-out election or cash equal to 10% of their share of the settlement fund if they do exercise the opt-out election.

The company stressed in the amended disclosure statement that these creditors would limit their recovery to 10% by making the election instead of 100% of their share of the settlement fund;

• Holders of subordinated claims will receive no distribution; and

• Existing interests will be cancelled and extinguished.

Ciena is a New York-based portfolio company for Allied Capital, a business development company that invests long-term debt and equity capital in middle market businesses. The company filed for bankruptcy on Sept. 30, 2008. Its Chapter 11 case number is 08-13783.

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