Sirva agrees to grant distribution to general unsecured creditors

By Caroline Salls

Pittsburgh, April 17 - Sirva Inc. requested court approval to make several "immaterial" changes to its pre-packaged plan of reorganization without being required to resolicit creditor votes, including providing a distribution to creditors covered under a controversial second class of unsecured claims, according to a Thursday filing wit the U.S. Bankruptcy Court for the Southern District of New York.

As previously reported, holders of class 5 general unsecured claims and Sirva's official committee of unsecured creditors have spoken out about the separate treatment of the two classes of unsecured claims proposed in the pre-packaged plan.

Holders of class 4 unsecured ongoing operations claims were slated to receive full payment under the pre-packaged plan, while holders of class 5 general unsecured claims were not scheduled to receive any distribution.

However, under the changes announced Thursday, general unsecured creditors will now be paid in full via issuance of a $3.5 million unsecured note.

The proposed changes include:

• Debt under the company's second-lien credit facility will be reduced by $50 million in order to increase the value of the stock to be distributed to pre-bankruptcy lenders under the plan;

• The terms of a new credit facility established under the plan have been changed to give the new credit facility lenders an additional 350 basis points in paid-in-kind interest per year;

• Holders of general unsecured claims will receive beneficial interest in a $3.5 million unsecured note in full satisfaction of their claims; and

• The general unsecured creditors' note will be issued on substantially the same economic terms as the company's pre-bankruptcy lenders will receive under the second-lien credit facility, but the note will be classified as junior to the second-lien facility.

Sirva said it does not need to resolicit creditor votes because the proposed changes do not negatively affect any creditors. In addition, the company said the proposed credit facility changes were already disclosed in the original solicitation package delivered to pre-bankruptcy lenders.

A hearing on the proposed changes has been scheduled for Friday. A combined hearing on approval of the disclosure statement and pre-packaged plan will also be held Friday.

Sirva, a Westmont, Ill.-based relocation services provider, filed for bankruptcy on Feb. 5. Its Chapter 11 case number is 08-10375.

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