Kaiser files amended reorganization plan; unsecured creditors to recover 2.7% in stock

By Caroline Salls

Pittsburgh, Sept. 7 - Kaiser Aluminum Corp. filed its second amended plan of reorganization and disclosure statement Wednesday with the U.S. Bankruptcy Court for the District of Delaware, giving unsecured creditors 2.7% recovery in new common stock of the reorganized company.

The reorganization plan gives two employee trusts a majority of the new common stock of the reorganized company.

Unsecured creditors, including holders of the company's notes, will also receive stock for a 2.7% recovery.

The company expects to emerge from Chapter 11 during the fourth quarter of 2005.

The majority of the reorganized company's new common stock will be distributed to two voluntary employee benefit associations that were created in 2004 for salaried and hourly retirees in connection with the cancellation of retiree medical plans.

The Union VEBA Trust for hourly employees will receive 11.44 million shares or 57.2% of the new common stock in the reorganized company and cash equal to any contribution in the union plan.

The Retired Salaried Employee Trust will receive 1.94 million shares or 9.7% of the new common stock.

In addition to the shares to be distributed under the plan, 2.22 million shares will be available to be issued under an equity incentive plan.

All pre-bankruptcy personal injury claims relating to asbestos, silica, coal tar pitch and hearing loss will be permanently resolved by the formation of trusts funded primarily by Kaiser's rights to proceeds from insurance policies.

The personal injury trusts will be funded by $13 million in cash, personal injury insurance assets, all of the outstanding shares of reorganized debtor KAE Trading Inc. and 75% of the $1.11 billion Kaiser Finance Corp. pre-bankruptcy claim against Kaiser Alumina Australia Corp.

Treatment of creditors under the plan will include:

*Holders of $5 million in secured claims will receive 100% recovery in cash;

*Holders of $616 million in Pension Benefit Guaranty Corp. claims against Kaiser's Canadian debtor will receive 6.6% recovery in 2.16 million shares of the new common stock of the reorganized company and $2.5 million in cash.

The PBGC also will receive 1.08 million shares of new common stock as holder of a general unsecured claim;

*Holders of $2.9 billion of general unsecured claims will receive 2.7% recovery in 4.46 million shares of the new common stock.

Allowed general unsecured claims will include $181.17 million in 9 7/8% senior note claims, $181.19 million in 10 7/8% series B senior note claims, $51.77 million in 10 7/8% series D senior note claims, $427.2 million in subordinated note claims, $12.76 million in 6½% RPC revenue bond claims, $20.05 million in 7¾% SWD revenue bond claims and $18.05 million in 7.6% SWD revenue bond claims.

Existing equity holders will receive nothing.

Kaiser expects to get $200 million in exit financing from JPMorgan Chase Bank. The exit facility will include a $60 million letter-of-credit facility, a $50 million term loan and a $17.5 million swingline loan.

The revolving portion of the facility will bear interest at Libor plus 225 basis points and mature Feb. 11, 2010, and the term loan will bear interest at Libor plus 550 basis points and will mature on Feb. 11, 2011.

Kaiser, a Houston-based aluminum company, filed for bankruptcy on Feb. 12, 2002 in the U.S. Bankruptcy Court for the District of Delaware. Its Chapter 11 case number is 02-10429.

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