O'Sullivan makes pre-packaged Chapter 11 filing; has commitment for $35 million DIP

By Caroline Salls

Pittsburgh, Oct. 14 - O'Sullivan Industries Holdings, Inc. made a pre-packaged Chapter 11 bankruptcy filing Friday with the U.S. Bankruptcy Court for the Northern District of Georgia.

The company's plan of reorganization has the support of holders of 83% of its senior secured notes, according to a news release.

O'Sullivan has also received a commitment for up to $35 million of debtor-in-possession financing from CIT Group/Business Credit, Inc.

The DIP facility, together with funds from operations, is expected to provide the liquidity necessary to enable O'Sullivan to meet its obligations to its suppliers, customers and employees during the Chapter 11 reorganization process.

According to court documents, O'Sullivan has $158,433 in assets and $132.15 million in debt, including 16.43 million shares of senior preferred stock, 933.01 million shares of series B junior preferred stock, 50,000 shares of series C junior preferred stock, 1.37 million shares of class A common stock and 401,422 shares of class B common stock.

The company's largest unsecured creditors include Bancboston Investments, Inc. with a debt claim of $29.76 million and Radio Shack/Tandy with an unknown amount agreement claim.

President and chief executive officer Robert S. Parker said in the release that the bankruptcy filing is an essential and necessary step in the turnaround that has been underway since the new management team began to come on board in June 2004.

"We are taking this step to deal with O'Sullivan's debt burden and not because of operational issues," he said in the release.

"While we would have liked to achieve a consensual restructuring outside of Chapter 11, O'Sullivan's debt burden and complex capital structure left us no choice but to take this step. "

Parker said the company's recent key initiatives and achievements include transforming the sales organization to work in closer partnership with retailers; implementing a disciplined consumer-focused new product development process; improving operating efficiency, cutting waste and reducing spending and reducing inventory by $13 million.

"There will be more improvements to come, but to get there, O'Sullivan has had

to address its capital structure," Parker said in the release.

Under the proposed plan, holders of O'Sullivan's 10.63% senior secured notes would receive 100% recovery in the form of 10 million shares of new O'Sullivan Holdings common stock and $10 million in new secured notes.

General unsecured creditors, including holders of O'Sullivan Industries, Inc.'s 13 3/8% senior subordinated notes, would receive no recovery under the plan.

All outstanding debt obligations and all outstanding shares of the company's preferred stock, common stock, warrants and options would be cancelled and holders would receive no distribution.

As a result of the bankruptcy filing, O'Sullivan did not file its Form 10-K annual report with the Securities and Exchange Commission Thursday.

O'Sullivan is a Lamar, Mo., manufacturer of ready-to-assemble furniture. Its Chapter 11 case number is 05-83076.

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