Congoleum U.S. Trustee claims latest reorganization plan still faulty

By Caroline Salls

Pittsburgh, April 30 - Congoleum Corp.'s U.S. Trustee raised objections to the company's proposed plan of reorganization, arguing that the plan "still suffers from the same infirmities as in past plans," according to a Tuesday filing with the U.S. Bankruptcy Court for the District of New Jersey.

Specifically, U.S. Trustee Kelly Beaudin Stapleton said confirmation of the plan should be denied because it does not call for equal distributions to similarly situated asbestos personal injury creditors, and it does not comply with bankruptcy code funding requirements.

According to the objection, although the plan calls for distribution of 50.1% of the new common stock in the reorganized company to an asbestos claims trust, those shares will most likely be purchased by the company's bondholders under a court-approved put/call backstop agreement within two to three months of the plan effective date.

As a result, Stapleton said the trust will not have the continuous source of funding required under bankruptcy law.

In addition, Stapleton said the plan includes improper release provisions.

The plan confirmation hearing is scheduled for June 26.

Congoleum, a Mercerville, N.J.-based flooring company, filed for bankruptcy on Dec. 31, 2003. Its Chapter 11 case number is 03-51524.

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