Keystone Consolidated emerges from Chapter 11

By Caroline Salls

Pittsburgh, Sept. 1 - Keystone Consolidated Industries, Inc. emerged from Chapter 11 bankruptcy proceedings when its plan of reorganization took effect Wednesday, according to a Thursday filing with the U.S. Bankruptcy Court for the Eastern District of Wisconsin.

Keystone's plan, which was confirmed on Aug. 10, gives all of the reorganized company's stock to unsecured and debtor-in-possession creditors.

Under the plan, Sherman Wire Co.'s assets and operations will be sold to Keystone and it will operate as a wholly owned Keystone subsidiary.

The plan also calls for the liquidation of its pre-bankruptcy subsidiaries Sherman Wire of Caldwell, Inc.; J.L. Prescott Co. and DeSoto Environmental Management Inc. and the distribution of proceeds to their unsecured creditors.

Under the plan of reorganization:

*Holders of secured claims will have their claims reinstated, giving them 100% recovery;

*Holders of general unsecured claims will receive $5.2 million in cash, a $4.8 million secured note and or 49% of the common stock of the reorganized company;

*Unsecured creditors of FV Steel & Wire Co. will be paid in full in cash;

*Holders of Congress Financial Corp. DIP claims will get 100% recovery in cash;

*EWP Financial, LLC, an affiliate of Contran Corp., Keystone's pre-petition majority shareholder, will, in its role as one of Keystone's DIP lenders, convert $5 million of its credit facility, certain pre-petition unsecured claims and certain administrative claims into 51% of the common stock of reorganized Keystone;

*Holders of old preferred stock, old common stock and other securities claims will get nothing.

Exit facility terms

The company obtained an $80 million exit credit facility.

Wachovia Capital Finance Corp. is the administrative agent for the facility, and Wachovia Capital Markets Inc. is the lead arranger and bookrunner.

The financing will be used to fund Keystone's plan of reorganization and to provide working capital for its business.

Included in the $80 million facility is a term loan of up to $25 million and a revolving credit facility, with availability on the revolver set by a borrowing base. There is also a letter-of-credit facility of up to $6 million.

The interest rate will be set by a grid based on excess availability.

For availability of more than $25 million, the revolver will be at Libor plus 200 basis points and the term loan at Libor plus 225 bps; for availability of $15 million to $24.9 million, the revolver will be at Libor plus 225 bps and the term loan at Libor plus 250 bps; and for availability of $14.9 million or less, the revolver will be at Libor plus 250 bps and the term loan at Libor plus 275 bps.

The loan has a 25 basis point unused fee.

Call protection is 101 in the first year, 100.5 in the second year and 100.25 after that.

The facility matures after five years.

Keystone will be required to use excess cash flow to pay down the term loan by up to $2 million a year and $5 million in total.

"The success of our restructuring has allowed Keystone to emerge with improved cost structure, liquidity, financial condition and competitive position with other steel and wire product manufacturers - both domestic and foreign," president and chief executive officer David L. Cheek said in a company news release.

Reorganized Keystone's board of directors consists of seven members, two each of which were designated by Contran and the official committee of unsecured creditors, respectively.

The remaining three directors are independent. One was appointed by Contran with the committee's consent and the other by the committee with Contran's consent.

Keystone, a Dallas-based fencing and wiring company, filed for bankruptcy on Feb. 26, 2004. Its Chapter 11 case number is 04-22422.

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