Optima Specialty Steel proposes plan changes based on DDJ sponsorship

By Caroline Salls

Pittsburgh, Sept. 21 – Optima Specialty Steel, Inc. requested court approval to make changes to its confirmed plan of reorganization to incorporate a transaction under which DDJ Capital Management, LLC will serve as plan sponsor, according to a motion filed with the U.S. Bankruptcy Court for the District of Delaware.

As previously reported, the support agreement with shareholder Optima Acquisitions, LLC for the plan confirmed on June 29 was terminated on Aug. 31.

Since the termination of the previous support agreement, the company said it has worked with the official committee of unsecured creditors appointed for its bankruptcy case and DDJ to formulate an alternative transaction.

The proposed plan changes are fully supported by Optima Specialty Steel’s minority debtor-in-possession financing lenders and the committee, the motion said.

The company said the modified plan continues to provide for a comprehensive reorganization through a debt-for-equity swap of unsecured notes claims, all of which are held by accounts and investment funds managed by DDJ.

Plan comparison

Optima Specialty Steel said the primary differences between the confirmed plan and the modified plan include a provision under which the DIP facility will be paid in full from the proceeds of an up to $240 million exit term loan facility backstopped by DDJ on behalf of some of its managed accounts and investment funds.

In addition, the unsecured notes claims will be converted into 100% of the new common stock in reorganized Optima.

General unsecured claims that are due and payable as of the plan effective date will be paid in full in cash, without post-bankruptcy interest.

Existing Optima equity interests will be extinguished and holder Optima Acquisition will not receive any distribution under the modified plan.

In comparison, under the previously confirmed plan, Optima Acquisition would have kept its interest.

Also, the modified plan retains causes of action against Optima Acquisition related to the termination of the support agreement and good faith deposits.

According to the motion, the DDJ unsecured noteholders and the committee are the only parties in interest other than Optima Acquisition that are affected by the modified plan, and the only change to the treatment of general unsecured claims is that post-bankruptcy interest will not be paid.

Exit timeline

Under a proposed timeline, the hearing on confirmation of the amended plan would be held on Oct. 27.

The company said this timeline would allow the plan to take effect by Oct. 27, ahead of the Oct. 31 termination of Optima’s DIP facility.

A hearing on allowing solicitation of the modified plan is scheduled for Sept. 27.

Optima is a Miami-based specialty steel manufacturer. The company filed bankruptcy on Dec. 15, 2016 under Chapter 11 case number 16-12789.

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