Wellman to revise DIP order to provide creditors committee with adequate protection

By Aaron Hochman-Zimmerman

New York, April 1 - Wellman Inc. will be required to provide adequate protection to its unsecured creditors in order to obtain final approval for its debtor-in-possession credit facility, judge Stuart Bernstein decided at a hearing in the U.S. Bankruptcy Court for the Southern District of New York.

Still, "the creditors committee reserves the right to challenge that at some point," Jonathan Henes of Kirkland & Ellis LLP, representing Wellman, told Prospect News.

"We will need to revise the DIP order to take that into account," he said.

The new DIP order is expected "soon," but is required to be submitted to the court before April 7.

Wellman was granted interim access to the $225 million DIP facility on Feb. 27.

Deutsche Bank Securities is the lead arranger and bookrunner, and Deutsche Bank Trust Co. Americas is the administrative agent and collateral agent.

The $225 million DIP commitment includes a $40 million letter-of-credit subfacility.

The DIP facility will mature on the earliest of one year from closing, 45 days after the interim DIP order if a final order has not been entered, the effective date of a plan of reorganization and upon funding of a sale of the company.

Interest will be Libor plus 275 basis points.

The company will pay a fee of 1.25% of each lender's commitment, a closing fee of 0.5% of the maximum amount of the loan and a fee equal to 0.375% times the daily average unused portion of the facility.

Wellman will also pay a 275 bps standby letter-of-credit fee.

The proceeds of the DIP financing, combined with cash from operations, will be used to fund the company's post-bankruptcy operating expenses, including payments to employees and suppliers, the release said.

Wellman said a sale is the most likely outcome in its Chapter 11 case and the company plans to select a stalking horse bidder by April 22, according to a March 26 motion.

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

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