Telogy obtains final court approval of reorganization plan

By Jennifer Lanning Drey

Eugene, Ore., May 19 - Telogy Inc. obtained final court approval of its reorganization plan and related disclosure statement, attorneys at Pachulski, Stang, Ziehl, Young, Jones & Weintraub law firm said Friday.

The approval came from the U.S. Bankruptcy Court for the Northern District of California late Thursday.

Under the plan, holders of $170.4 million in pre-bankruptcy senior secured claims will recover 790,331 new series A shares and $30 million in term loan notes, as well as a share of $1.3 million.

The company will enter into a $30 million five-year term loan at Libor plus 500 basis points. The term loan notes can be put to reorganized Telogy at a price of 101% and are callable any time after the plan's effective date at 102% before the second anniversary of the effective date, at 101% between the second and third anniversary of the effective date and at par thereafter.

Reorganized Telogy will issue 899,559 new shares, including 796,120 series A new shares, 4,819 series B new shares, 49,408 series C new shares and 49,408 series D new shares.

The company will also issue warrants to holders of subordinated claims to purchase additional 88,398 series A shares if they vote to accept the plan.

"We at Telogy are gratified to have accomplished our goal of successfully recapitalizing the company. We originally made the decision to recapitalize to greatly reduce debt, strengthen Telogy's capital structure and enhance our competitive position," said Anthony M. Schiavo, chairman and chief executive officer of Telogy, in April in a company press release regarding the reorganization plan.

"We look forward to beginning this new chapter of Telogy's story, and believe the successful recapitalization will enhance our ability to aggressively leverage Telogy's talents, services and products to serve our customers."

Treatment of creditors will include:

• Holders of $170.4 million in pre-bankruptcy senior secured claims will receive their share of $1.3 million in special trust account cash, their share of 793,083 new series A shares and cash for all fees and expenses for the company's reorganization;

• Holders of $3,000 in Charter One loan agreement secured claims will receive reinstatement of the legal, equitable and contractual right to their claims, for which they will be paid in full;

• Holders of $1.15 million in general unsecured claims will receive their share of $100,000;

• Holders of $38,000 in critical vendor claims, including Agilent, Tektronix and Rhode & Schwarz, will receive 100% of their claim;

• Holders of $61 million in subordinated claims will receive their share of 3,790 new series A shares and two series of subordinated claim warrants to acquire 88,398 series A shares if they vote to accept the plan.

If they vote to reject the plan, subordinated claimholders will be treated as general unsecured claimants;

• Holders of intercompany claims, junior subordinated claims and interest claims will receive no distribution;

• Holders of $59,000 in convenience claims of $5,000 or less, who elect to reduce their claim to $5,000 or less or whose claims are reduced to $5,000 or less will be paid in full in cash.

Telogy said previously that it expects to obtain an up to $20 million five-year revolving exit facility.

Telogy, a Union City, Calif.-based electronics testing company, filed for bankruptcy on Nov. 29. Its Chapter 11 case number is 05-49371.

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