GSI Group's plan of reorganization is confirmed by bankruptcy court

By Lisa Kerner

Charlotte, N.C., May 27 - GSI Group, Inc.'s fourth modified joint Chapter 11 plan of reorganization was confirmed, according to a Thursday filing with the U.S. Bankruptcy Court for the District of Delaware.

As previously reported, last week the court approved a restructuring plan support agreement reached with representatives of the key stakeholders involved in its Chapter 11 bankruptcy case.

GSI reached an agreement on a term sheet with the holders of more than 88% of the outstanding total principal amount of its 11% senior notes due 2013 and the company's official equity committee.

The term sheet allows for a new plan support agreement and changes to some of the terms of the plan filed on April 9.

Under the proposed plan changes:

• The company's existing shareholders, including those shareholders who may also be noteholders, would retain an ownership of between 48.9% and 87.3% of the company's post-reorganization common stock, subject to the release and distribution of new common shares placed in reserve until resolution of pending litigation and depending on the level of shareholder participation in the proposed rights offering;

• Under the rights offering, the company's shareholders would have a right to buy up to $85 million of new common shares of the reorganized company for a purchase price of $1.80 per share;

• The proceeds from the rights offering, together with about $10 million of the company's cash, would be used for partial satisfaction of the notes;

• Notes in the principal amount of $5 million would also be exchanged for additional common shares of the reorganized company at $1.80 per share, and those noteholders, who have agreed to backstop the entire rights offering would exchange a minimum of $20 million of notes for new common shares at $1.80 per share, regardless of the number of shares purchased in the rights offering;

• The principal amount of notes remaining after these various exchanges would then be exchanged for new senior secured notes; and

• Noteholders will receive payment in cash of all pre-bankruptcy and post-bankruptcy interest.

Consenting noteholders who have agreed to backstop the rights offering will receive a cash backstop fee equal to 5% of the maximum rights offering proceeds, and all noteholders will be entitled to their share of an alternate transaction fee of 2% of the principal amount of the notes if another transaction is completed before the rights offering.

As previously reported, the noteholder backstop parties include Liberty Harbor, LLC, Tennenbaum Capital Partners, LLC, Highbridge Capital Management, LLC, Hale Capital Partners, LP and Tinicum, Inc. and/or their affiliated or managed funds.

Bedford, Mass.-based GSI makes precision motion component products, lasers and laser-based manufacturing systems. The company filed for bankruptcy on Nov. 20, 2009 in the U.S. Bankruptcy Court for the District of Delaware. Its Chapter 11 case number is 09-14109.

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