Sirva's modified reorganization plan confirmed; bankruptcy emergence seen May 9

By Rebecca Melvin

New York, May 7 - Sirva Inc.'s first amended, pre-packaged plan of reorganization was confirmed by the U.S. Bankruptcy Court for the Southern District of New York, and the relocation-services company expects the plan effective date will be May 9.

"Assuming the order is entered today, we plan to get all the documentation together and go effective on Friday," Sirva attorney Adam Paul of Kirkland & Ellis said following the confirmation hearing on Wednesday.

Sirva had said the pre-packaged bankruptcy was initially negotiated to free its operations from a heavy debt service burden and to strengthen its balance sheet so that it is better positioned to weather the continuing weak U.S. housing market.

Judge James Peck approved the plan following withdrawal of all objections and after re-solicitation of class one creditors. Of 48 class one creditors, 45 voted and all approved the plan.

Nevertheless, Peck asked for a defense from Sirva's attorneys as to whether the cram plan was non-discriminatory.

"In the ordinary complex Chapter 11 case, and this one is extraordinary, I believe all creditor classes are entitled to fair disclosures and ability to be heard," Peck said, adding that he was comfortable confirming the current plan after hearing from counsel for the creditors committee that solicitation from other creditors would have been detrimental to creditor interests.

The settlement Sirva struck with its official committee of unsecured creditors gave class five creditors 25% recovery as opposed to 0% recovery under the initial plan, but it was conditioned on forfeiture of rights to solicitation.

Under the plan, Sirva's outstanding bank debt will be reduced by about $200 million and annual cash interest expense will be reduced by about $54 million.

Upon emergence, the DIP financing facility will convert into a $215 million senior secured credit facility to fund ongoing operations and borrowings. Once its plan becomes effective, Sirva will become a private company, and its stock will no longer be publicly traded.

Westmont, Ill.-based Sirva filed its pre-packaged Chapter 11, covering 60 debtor entities, on Feb. 5. Its Chapter 11 case number is 08-10375.

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