Judge confirms Key Plastics pre-packaged Chapter 11 plan

By E. Janene Geiss

Wilmington, Del., Jan. 29 - Key Plastics LLC received confirmation of its Chapter 11 plan of reorganization and approval of its disclosure statement Thursday in the U.S. Bankruptcy Court for the District of Delaware.

"The company has the capital structure now to allow it to go forward and provide quality service to its customers," said Martin A. Sosland of Weil, Gotshal & Manges, attorney for Key Plastics.

The company filed for bankruptcy in August after it said it experienced financial difficulties resulting from the downturn in the automotive industry.

Its pre-packaged reorganization was a way for the company to de-leverage through the reduction of about $122 million of debt, Sosland told judge Mary F. Walrath of the U.S. Bankruptcy Court in the District of Delaware.

Walrath said she would confirm the plan based on its overwhelming acceptance by the committee of creditors.

Of the 89% of creditors who voted, 100% voted to accept the plan, which allows for holders of the company's $115 million of 11¾% senior notes due 2013 three treatment options.

Under the first option, noteholders will receive new Key Plastics equity but not participate in the company's rights offering; under the second option, noteholders will receive new equity and subscribe for additional equity by participating in the rights offering; and under the third option, noteholders will receive cash equal to 16% of the face value of the notes.

According to Thursday's filing, holders of $9 million of the notes elected to receive just new equity, holders of $59.87 million elected to receive new equity and participate in the rights offering, and holders of $46.13 million of the notes elected to receive cash.

Noteholders who choose the second option will be entitled to subscribe for an additional 35% of new Key Plastics equity at a price of $57.15 per share under the $20 million rights offering.

Wayzata Investment Partners LLC has agreed to backstop the rights offering in exchange for a fee of 2% of the backstop commitment.

"We appreciate you allowing us to enter and exit the Chapter 11 as expeditiously as possible," Sosland told the judge.

Key Plastics, a Northville, Mich., supplier of highly engineered and value-added plastic components and functional assemblies to original equipment manufacturers of light vehicles, filed for bankruptcy on Dec. 15. Its Chapter 11 case number is 08-13324.

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