FiberMark shareholders fail in move to appoint equity holders' committee

New York, Sept. 17 - FiberMark Inc.'s shareholders failed in their attempt to have an official equity security holders' committee appointed.

The U.S. Bankruptcy Court for the District of Vermont refused their request to create a committee, saying that "sufficient cause does not exist at this time to support" the proposal.

However the rejection is without prejudice, allowing the shareholders to try again at a future date.

The shareholders had argued the case meets the criteria for an equity holders' committee. The case is large and complex. The Brattleboro, Vt.-based specialty paper company has two series of unsecured notes outstanding with about $330 million in principal outstanding. FiberMark also is the parent of 16 companies.

More than 1,000 investors own FiberMark stock, which means the company's shares are widely held.

"With 7 million shares of common stock outstanding, this represents nearly $60 million in market capitalization, which will be erased unless an equity committee is appointed to protect shareholder interests," the shareholders said in court documents.

Management and members of the board of directors own less than 170,000 shares, which means they have no incentive to stick up for shareholders, the shareholders said.

In addition, the company is not hopelessly insolvent. Write-downs by management of goodwill assets that were not explained - not a change in FiberMark's asset structure or business - caused book shareholder equity to drop to a negative $68 million from $36 million at the end of 2002, the shareholders said.

However the U.S. Trustee, which had already denied the shareholders' request, told the court that the company is insolvent and also argued that the case is not complex.

FiberMark filed for bankruptcy on March 30. Its Chapter 11 case number is 04-10463.

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