American Gilsonite files for Chapter 11 with 67% noteholder support

By Susanna Moon

Chicago, Oct. 25 – American Gilsonite Co., Inc. and its subsidiaries filed a joint pre-packaged plan of reorganization as part of a filing made Monday under Chapter 11 of the U.S. Bankruptcy Code with the U.S. Bankruptcy Court for the District of Delaware.

American Gilsonite has secured an agreement with holders of more than 67% of its second-lien notes and its current equity sponsor “on the terms of a reorganization that will eliminate substantial indebtedness, significantly reduce debt service and provide financing to restructure its balance sheet,” according to a company announcement.

Financing terms

The supporting noteholders will provide the company with $30 million debtor-in-possession financing with an original issue discount of $1.2 million. The principal amounts extended under the DIP financing will convert to an exit facility when the company emerges from the restructuring process.

Wilmington Trust, NA is the DIP loan agent.

Interest will accrue at Libor plus 900 basis points, with a 1% Libor floor.

The facility will mature 12 months after the closing date unless a termination event occurs before that maturity date.

The company said it has also filed customary first-day motions with the court to support its business operations.

Plan treatment

Under the pre-packaged plan, holders of general unsecured claims, including trade vendors, employees and lease counterparties, will be fully paid because of existing obligations in the normal course of business. The company’s revolving lenders will also be paid in full.

Holders of American Gilsonite Holding interests will receive 2% of the new equity interests in the reorganized company.

The supporting noteholders have agreed to vote for the pre-packaged plan and exchange their loans for reorganized equity and subordinated debt. The pre-packaged plan, which will transition ownership to the company’s second-lien noteholders, is also supported by the company’s current shareholders, the release noted.

Specifically, the company said in court documents that some second-lien noteholders will provide the DIP facility that will be used to pay the existing pre-bankruptcy credit agreement and provide American Gilsonite with an additional $7.5 million of liquidity, with the entire principal portion to be converted into the exit loan.

The second-lien notes will be canceled and, in exchange, holders will receive 98% of the new equity of the reorganized company and $100 million in subordinated notes.

“We are pleased to have reached an agreement with our key financial stakeholders that recognizes the underlying strength of our business and provides a path to restructure our debt without any impact on our customers, employees or vendors,” David G. Gallagher, the company’s chief executive officer, said in a company press release.

“American Gilsonite has positive operating cash flow, a highly differentiated product offering, more than 100 years of mineral reserves and a broadly diversified customer base. With the implementation of this pre-packaged reorganization plan, we will significantly strengthen the company’s balance sheet and create a capital structure that is more sustainable over the long term.”

Debt details

According to court documents, American Gilsonite has $100 million to $500 million in both assets and debt. The company had $290 million in outstanding secured debt obligations as of Monday.

The company’s largest unsecured creditor is the Utah Department of Transportation, with a state agency claim in an unliquidated amount. No unsecured creditors were listed with specified claim amounts of $1 million or more.

The company is represented by Richards, Layton & Finger, PA.

American Gilsonite is a Houston-based miner and processor of uintaite, a unique mineral which the company markets under its trademark name Gilsonite. The Chapter 11 case number is 16-12316.

Caroline Salls contributed to this report

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