O'Sullivan Industries enters forbearance agreement on 10.63% notes

By Caroline Salls

Pittsburgh, Aug. 15 - O'Sullivan Industries, Inc. is continuing negotiations with its creditors regarding a consensual financial restructuring of its balance sheet and has entered into a forbearance agreement with the controlling holders of its 10.63% senior secured notes due 2008, according to a company news release.

According to the release, O'Sullivan plans to use the forbearance period to continue its restructuring efforts and the initiatives that it has undertaken to improve its liquidity position and operations.

"We will continue to negotiate the terms of a financial restructuring with our noteholders and others during the time afforded us by the forbearance agreement, and we expect to maintain normal operations throughout the financial restructuring process," president and chief executive officer Bob Parker said in the release.

Under the forbearance agreement, the noteholders have agreed not to exercise any enforcement rights or remedies available to them under the senior secured notes indenture as a result of O'Sullivan's non-payment of interest on the senior secured notes before the end of the grace period.

If the enforcement were made, the debt would become immediately due and payable.

The forbearance agreement will expire on Sept. 15.

The failure to pay the interest on the senior secured notes within the grace period also constitutes an event of default under O'Sullivan's $40 million working capital revolving line of credit agreement with General Electric Capital Corp. as agent and a lender.

O'Sullivan is negotiating with GECC to amend the credit agreement to address these issues. To date, GECC has continued to make funds available under the credit agreement pending negotiation of an amendment.

As previously reported, O'Sullivan has retained Lazard Freres & Co. LLC to serve as its financial adviser and Dechert LLP to serve as its legal adviser to assist with its evaluation of strategic alternatives and restructuring efforts.

O'Sullivan is a Lamar, Mo., manufacturer of ready-to-assemble furniture.

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