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KB Toys emerges from Chapter 11
By Caroline Salls
Pittsburgh, Aug. 30 - KB Toys, Inc. emerged from bankruptcy as its Chapter 11 reorganization plan became effective Tuesday, according to a company news release.
PKBT Funding LLC, an affiliate of Prentice Capital Management LP, will fund the plan and will take control of the company.
The plan is based on a funding agreement between KB Toys and PKBT under which the Prentice affiliate will invest $20 million in a reorganized KB Toys and provide a seasonal overadvance credit facility of up to $25 million in exchange for 90% of the common stock and 100% of the preferred stock of the reorganized company.
The remaining common stock will be held by a trust for the benefit of the unsecured creditors of those KB Toys entities being reorganized under the plan of reorganization.
Under the plan, KB Toys will issue 45,000 shares of new common stock, including 40,500 shares to the plan funder and 4,500 shares to a residual trust.
KB Toys will also issue 17,000 preferred shares to PKBT Funding.
The distributions will give PKBT Funding 90% of the common stock and 100% of the preferred stock of the reorganized KB Toys.
Holders of bank secured claims will get 100% recovery; holders of other secured claims will recover the value of the collateral securing the claim.
Those with unsecured claims against one of the holding companies will get 2% plus litigation recoveries from the recapitalization claim via the residual trust.
Holders of class A and class B common stock will get no recovery.
KB Toys' new majority owner, PKBT Funding LLC, named Gregory R. Staley, former president of Toys "R" Us' USA and International divisions, as the reorganized company's new president and chief executive officer.
KB Toys, a Pittsfield, Mass., toy retailer, filed for Chapter 11 on Jan. 14, 2004 in the U.S. Bankruptcy Court for the District of Delaware. Its Chapter 11 case number is 04-10120.
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