Modular Space pre-packaged plan of reorganization confirmed by court

By Caroline Salls

Pittsburgh, Feb. 15 – Modular Space Corp.’s pre-packaged plan of reorganization was confirmed Wednesday by the U.S. Bankruptcy Court for the District of Delaware.

As previously reported, the company filed bankruptcy to implement a financial restructuring agreement reached with its lenders and bondholders and an equity sponsor.

Modular Space said the restructuring will eliminate roughly $400 million of debt from its balance sheet, provide $90 million of new equity capital from the bondholders via a rights offering and include a new $719 million credit facility to be provided by the existing asset-based lenders.

This transaction is supported by all of the lenders, 78% of the holders of the company’s 10¼% senior secured second-lien notes due 2019 and Modular Space’s primary equityholder.

Under the company’s pre-packaged plan of reorganization, all trade creditors will be paid in full and on time, and employee wages and benefits will be paid in full in the ordinary course without interruption.

Noteholders will receive substantially all of the common stock in the reorganized company in exchange for existing claims for outstanding principal and accrued interest.

Existing equityholders will retain a small equity interest in the reorganized company.

Modular Space said the equity interests received by the noteholders and existing equityholders will be significantly diluted by the equity interests issued in connection with a rights offering.

Under the rights offering, noteholders may subscribe to purchase an additional 18.32 million shares of equity in the reorganized entity.

In exchange for their agreement to backstop the rights offering, some members of an informal noteholder group would receive a backstop fee equal to 5%, or 915,875 shares, of the equity offered in the rights offering.

Berwyn, Pa.-based Modular Space sells and services modular space structures and storage containers. The company filed bankruptcy on Dec. 21 under Chapter 11 case number 16-12825.

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