Lenox files reorganization plan based on two sale scenarios

By Caroline Salls

Pittsburgh, Dec. 22 - Lenox Group, Inc. filed its plan of reorganization and related disclosure statement Friday with the U.S. Bankruptcy Court for the Southern District of New York.

According to the disclosure statement, the proceeds from the sale of the company's assets will be used to satisfy creditor claims through one of two scenarios.

If Lenox's term loan lenders are able to secure the appropriate financing, they will contribute their claims to a newly created entity, to be called New Lenox, that will credit bid the lenders' secured claim as part of a bid to acquire Lenox's assets.

If New Lenox is the successful bidder, the sale of the company's assets will be accomplished through the plan, and the term loan lenders will fund the costs of the plan, including paying administrative and other priority claims, the costs of the plan administrator and cash to provide a recovery for general unsecured creditors.

Under the second scenario, the assets would be sold to a third-party buyer, and the sale will be completed before plan confirmation.

In this scenario, the plan will not be confirmed unless the sale proceeds are sufficient to pay all the company's secured creditor groups in full in cash, with enough excess cash to fund the costs of the plan or the secured creditors having an interest in the sale proceeds agree to contribute a portion of the proceeds of the sale to cover the plan costs.

In addition, the plan allows any excess cash existing on the plan effective date after funding of two funds established under the plan to be distributed in accordance with a distribution priority waterfall.

Specifically, these excess funds would go first to the term loan lenders until their secured claims are paid in full, then to a plan administrator fund until the administrator decides there is enough cash to fund all of its obligations under the plan, then to a general unsecured claims fund.

Treatment of creditors will include:

• Holders of $2.4 million in administrative claims, $49 million in debtor-in-possession facility claims, $3.33 million in professional compensation and reimbursement claims and $279,000 in priority tax claims will recover 100% in cash;

• Holders of $98.5 million in term loan claims will receive their share of excess cash, provided that the lenders will receive no more than 100% of their claim;

• Holders of $18.89 million in general unsecured claims will receive cash from a general unsecured claims fund; and

• Equity interest holders will receive no distribution.

The disclosure statement approval hearing is scheduled for Jan. 22, and the plan confirmation hearing will be held on March 11.

Lenox, an Eden Prairie, Minn.-based tableware, collectibles and giftware products company, filed for bankruptcy on Nov. 23. Its Chapter 11 case number is 08-14679.

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