Werner second-lien creditors propose $175 million asset purchase amid 'sham' forbearance agreement

By Caroline Salls

Pittsburgh, Jan. 18 - Werner Holding Co. (DE), Inc.'s second-lien committee objected to the company's conditional waiver and forbearance agreement with its debtor-in-possession lenders and asked the company to take advantage of a $175 million asset sale offer made by an investor group comprised of creditors, according to a Thursday filing with the U.S. Bankruptcy Court for the District of Delaware.

According to the objection, the forbearance agreement has already expired, as it applied to the period of Dec. 29 through Jan. 15.

The committee also said the agreement does not provide the company with access to any of revolving credit facility the DIP is supposed to provide.

In addition, the committee said the agreement gives DIP lender Black Diamond an unsupportable broad general lease with nothing coming to the company in return.

"The debtors are now back where they were in December 2006," the committee said in the objection, "in default under the DIP facility, without a forbearance in place, and with Black Diamond threatening to exercise remedies to the detriment of every other creditor in these cases.

"The forbearance agreement is a sham."

As a result, the committee said it has organized an investor group comprised of Werner's creditors and that group has offered to buy substantially all of the company's assets for $175 million, which included $160 million in cash and $15 million in debt assumption.

The investor group includes holders of secured claims under the company's first-lien and second-lien credit facilities, as well as a substantial portion of holders of the company's 10% senior subordinated notes.

The purchase offer also allows general unsecured creditors and subordinated unsecured noteholders who are represented by the official committee of unsecured creditors to participate as investors.

The committee said the investor group has agreed to create an acquisition vehicle and members of the group have agreed to capitalize the buyer with $125 million of new equity to fund the purchase price.

A portion of a $90 million revolving credit facility, for which the investor group has obtained a commitment from LaSalle Business Credit LLC and ABN Amro Global Markets, will go to fund the remainder of the purchase price.

Werner, a Greenville, Pa., manufacturer and distributor of ladders, climbing equipment and ladder accessories, filed for bankruptcy on June 12, 2006. Its Chapter 11 case number is 06-10578.

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