Meridian Automotive files amended plan; pre-bankruptcy lenders to receive new common stock

By Caroline Salls

Pittsburgh, Sept. 8 - Meridian Automotive Systems, Inc. filed a fourth amended plan of reorganization and related disclosure statement Friday with the U.S. Bankruptcy Court for the District of Delaware, under which pre-bankruptcy lenders will receive common stock in the reorganized company if they vote to accept the plan.

According to the disclosure statement, during discussions with potential lenders regarding the financing commitments necessary to fund the proposed third amended, it became apparent to the company that uncertainty over the automotive industry outlook and the resulting deterioration of the market for automotive sector financing would leave financing commitments available only on non-underwritten and economically unfeasible terms, if at all.

As a result, Meridian said it decided to abandon the third amended plan and to instead focus on implementing a plan that would leave it with a substantially de-leveraged capital structure following emergence from bankruptcy.

Subsequently, on Aug. 18, Meridian said Ford announced a 21% reduction in its North American production for the last four months of 2006.

Because Ford remains one of Meridian's largest customers, this announcement prompted the company to revise its long-range business plan and to request that its financial advisers revise the enterprise valuation that formed the basis for the third plan.

The company will issue 2 million shares of new common stock under the plan.

Plan creditor treatment

Treatment of creditors under the plan will include:

• Holders of $100,000 in other secured claims will receive reinstatement of their claim or the collateral securing the claim;

• Holders of $294.61 million in pre-bankruptcy first-lien claims will receive a share of $98 million in cash and 95.5% of the total shares of new common stock in the reorganized company, as well as a share of pre-bankruptcy first-lien claim trust interests, which entitles the holder to a share of the net litigation trust recoveries.

If this class does not vote to accept the plan, then 100% of the new common stock will be distributed to holders of pre-bankruptcy first-lien secured claims.

Each pre-bankruptcy letter of credit will also be returned to the issuer undrawn and canceled;

• Holders of $179.81 million in pre-bankruptcy second-lien secured claims will receive their share of 4.5% of the new common stock in the reorganized company, their share of new warrants and their share of the pre-bankruptcy second-lien claim trust interests, which will entitle the holder to a share of the net litigation trust recoveries.

If this class rejects the plan, holders will receive their share of the second-lien trust interests, and 100% of the shares of new common stock will be distributed to pre-bankruptcy first-lien secured claimants;

• Holders of $96 million in general unsecured claims will receive their share of the general unsecured claims trust interests, which will entitle the holder to a share of the net litigation trust recoveries;

• Holders of $172.9 million in pre-bankruptcy subordinated claims, as well as pre-bankruptcy Meridian interests and intercompany claims, will receive no distribution.

Exit financing

Meridian said it expects to obtain up to $255 million in exit financing, to consist of a $75 million senior secured revolving line of credit and a $150 million senior secured term loan, plus an about $30 million synthetic letter-of-credit facility.

The company said it is in discussions with several lenders to arrange the exit financing.

A hearing to approve the disclosure statement is scheduled for Oct. 10.

"The company's emergence from Chapter 11 pursuant to our plan with less debt and increased liquidity will generate increased customer, supplier and employee confidence and contribute to our long-term success in the automotive industry," president and chief executive officer Richard E. Newsted said in a company news release.

Meridian, a Dearborn, Mich., supplier of lighting, exterior composites, console modules, instrument panels and other interior systems to automobile and truck manufacturers, filed for bankruptcy on April 26, 2005. Its Chapter 11 case number is 05-11168.

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