Motor Coach Industries exits bankruptcy with $230 million in financing

By Caroline Salls

Pittsburgh, April 20 - Motor Coach Industries International Inc. emerged from Chapter 11 bankruptcy on Friday, according to a company news release.

The company's plan of reorganization was confirmed by the U.S. Bankruptcy Court for the District of Delaware on Jan. 28. The court approved changes to the plan on Friday.

"I am particularly pleased that, given a very challenging economic backdrop and the tight credit markets, we were able to complete the process in just seven months," president and chief executive officer Tom Sorrells said in the release.

"This is a testament to the strong reputation and presence of our company in the industry and the unyielding commitment of Franklin Mutual Advisers, LLC, our new majority shareholder, through the final negotiations."

As previously reported, investment funds managed by Franklin Mutual Advisers became Motor Coach's majority shareholders through the conversion of third-lien secured debt into common stock and the issuance of $200 million in new preferred stock.

In conjunction with its emergence from Chapter 11, Motor Coach said it has obtained $230 million of exit financing.

Specifically, General Electric Capital Corp. is the arranger and lead lender under a $75 million senior secured revolving credit facility, and the company has arranged for a $155 million second-lien term loan from a group of lenders.

Bank of New York Mellon is the administrative agent on the term loan.

Interest on the GE Capital loan is Libor plus 600 basis points.

The term loan will accrue interest at Libor plus the applicable margin. Specifically, the cash margin will be 850 bps for the entire term of the loan, while there will be no paid-in-kind margin before the first anniversary of the effective date, a 200 bps PIK margin after the first anniversary but before the second anniversary, 375 bps after the second anniversary but before the third anniversary and 525 bps on and after the third anniversary.

The revolver will mature on May 1, 2012, and the term loan will mature on June 30, 2012.

The plan changes approved Friday include an increase in the amount of the company's rights offering to $200 million from $160 million, an increase in the number of preferred shares to be issued under the rights offering to 210,000 from 168,000 and a reduction in the term loan portion of the company's proposed exit facility to $155 million from $190 million.

Creditor treatment

Treatment of creditors will include:

• Holders of other priority claims and secured second-lien credit agreement claims will recover 100% in cash;

• Holders of other secured claims will either be paid in full in cash or receive the collateral securing the claim;

• Holders of secured third-lien credit agreement claims will receive 100% of the new common stock in the reorganized company that is not earmarked for distribution under a management equity plan as well as the right to participate in the preferred stock rights offering;

• Holders of general unsecured claims and interests in holdings will receive no distribution under the plan; and

• Intercompany interests will be retained.

Motor Coach Industries, a Schaumburg, Ill.-based designer, manufacturer and marketer of inter-city coaches and related replacement parts for the North American market, filed for bankruptcy on Sept. 15, 2008. Its Chapter 11 case number was 08-12136.

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