Wellman obtains court OK to sell Johnsonville plant for $17.9 million

By Rebecca Melvin

New York, Oct. 21 - Wellman Inc. obtained approval from the U.S. Bankruptcy Court for the Southern District of New York on Tuesday to sell the company's Johnsonville manufacturing plant for $17.9 million, subject to adjustments, to New Horizons.

Judge Stuart Bernstein said that the price was "reasonable" and that the sale, which proceeded on an expedited basis due to Wellman's imminent DIP lender obligations and the buyer's desire to preserve going-concern value, was good for the estate, as well as the Johnsonville community, where mothballing the plant would have cost 160 jobs.

Adjusted for accounts receivable, the sale price is $17 million, company counsel said, and of that amount $5.75 million goes to the first-lien holders, with the remainder going to the DIP lenders.

There was a subsequent bid received from Naik Industries for $19 million, but Bernstein was satisfied with the company's assertion that the Naik offer wasn't as solid as New Horizon's and that it wasn't certain that they could close in the timeframe necessary.

The plant is one of three facilities Wellman, a polyester and engineering resins maker, operated prior to bankruptcy. It planned to emerge from bankruptcy to operate all three plants, but in light of a court decision last summer, pegging Wellman's plant, property and equipment replacement value at $140 million, the company found itself unable to emerge from bankruptcy under its reorganization plan unless it sold assets.

In proffered testimony of from Mark Ruday, chief executive of Wellman, when Wellman filed for bankruptcy earlier this year, it contemplated reorganizing around all three facilities. But the Aug. 5 valuation meant the previous plan was not confirmable as proposed.

Immediately Wellman went to its DIP lenders and agreed that it would amend the DIP lines to cover part of the restructuring. The company also said it would exit the polyester business at the Palmetto and Johnsonville plants, according to Ruday's testimony.

The Palmetto plant sale is part of the disclosure statement.

The Johnsonville sale includes all assets including inventory, furnishing and equipment, all records used or held, all intellectual property, certain contracts assumed and assigned, and all accounts receivable.

Wellman, a polyester products manufacturer based in Fort Mill, S.C., filed for bankruptcy on Feb. 22, 2008. Its Chapter 11 case number is 08-10595.

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