MagnaChip Semiconductor Finance emerges from Chapter 11 bankruptcy

By Caroline Salls

Pittsburgh, Nov. 10 - MagnaChip Semiconductor Finance Co. emerged from Chapter 11 bankruptcy when the plan of reorganization submitted by its official committee of unsecured creditors took effect on Monday, according to a Tuesday filing with the U.S. Bankruptcy Court for the District of Delaware.

As previously reported, MagnaChip and its pre-bankruptcy lender agent filed a plan of liquidation on June 29 under which substantially all of the company's assets would be sold and the sale proceeds and available cash would be used to pay plan expenses.

The committee objected to the company's plan based on its belief that the total enterprise value of MagnaChip's estate and the assets of selling non-debtors justified a return to general unsecured creditors far in excess of that provided under the company's plan.

According to the plan confirmation order, the company subsequently filed a statement of support for the committee's plan.

Under the committee's plan, the company's operations will be reorganized and claims will be satisfied through the issuance of an up to $61.75 million four-year term loan to satisfy first-lien lender claims, the conversion of second-lien noteholder and subordinated note claims and an offering of $35 million of new common units.

Interest on the new term loan will be Libor plus 1,200 basis points.

The committee said it will obtain exit financing for its plan by offering eligible second-lien noteholders a right to subscribe for the new common units in reorganized MagnaChip, representing 74% of the new units.

Avenue Capital Management II, LP agreed to backstop the full amount of the proposed rights offering in exchange for 10% of the new common units.

Creditor treatment

Treatment of creditors under the committee's plan will include:

• Holders of administrative claims, tax claims and priority non-tax claims will recover 100% in cash;

• Other secured claims will be reinstated or holders will be paid in full in cash or through the return of the collateral securing the claim;

• Holders of first-lien lender claims will receive cash equal to 35% of their claim and a share of a new term loan;

• Holders of second-lien noteholder claims will receive 5% of new common units in the reorganized company and will be entitled to participate in a rights offering;

• Holders of general unsecured claims will recover 10% in cash as a gift from holders of second-lien note claims;

• Holders of subordinated debt claims will receive 1% of new common units as a gift from the second-lien noteholders and warrants to purchase 5% of the new common units with a strike price equivalent to a $600 million total enterprise value;

• Intercompany claims will either be adjusted, released, waived or discharged on the plan effective date, contributed to the capital of the obligor or reinstated, at the option of the reorganized company; and

• Interest holders will receive no distribution.

MagnaChip, a Sunnyvale, Calif.-based designer and manufacturer of analog and mixed-signal semiconductor products, filed for bankruptcy on June 12. Its Chapter 11 case number is 09-12008.

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