FiberMark's confirmation hearing adjourned indefinitely as bondholders still deadlocked

By Ellen Chang

Houston, March 15 - FiberMark, Inc.'s confirmation hearing for its plan of reorganization has been postponed indefinitely because its noteholders are still unable to reach agreement, according to a filing Tuesday with U.S. Bankruptcy Court for the District of Vermont.

FiberMark said if the noteholders are unsuccessful in resolving their differences then it will either withdraw the plan, modify certain aspects or pursue an alternative strategy for exiting Chapter 11.

The hearing had been scheduled for March 17 after already being postponed twice from the original Feb. 28 date.

Announcing the latest delay in a court filing, the company said it has been told that the noteholder members remain deadlocked over corporate governance issues, including the terms of the documents governing the new common stock and the new notes. The noteholder members are continuing their negotiations, the FiberMark added.

The company said it will seek a continued hearing for the confirmation hearing if the noteholders' negotiations are successful.

As previously reported, two noteholders, AIG Global Investment Corp. and Post Advisory Group, LLC, are opposing the plan because they say it does not reflect their understanding of earlier negotiations that had resolved a dispute which had threatened to disrupt approval of the plan.

Their previous support, they added, was dependent on the plan including provisions designed to protect minority holders of the notes and common stock to be issued by FiberMark in the reorganization -but not all those provisions have been included in the documents on the terms AIG and Post were expecting, the bondholders said.

They observed that Silver Point Capital claims to control more than 50% of FiberMark's notes.

The two investors said they are now objecting to the plan of reorganization because it is not in compliance with the bankruptcy code; has not been filed in good faith; includes substantive consolidation which is not permissible because it is being carried out as a convenience, not to the creditors' benefit; artificially impairs some classes of creditors; improperly classifies some classes of creditors; and is not fair and equitable.

In particular, AIG and Post are concerned that there are no limitations in the proposed indentures for the new notes on transactions with affiliates and provisions of the Trust Indenture Act are waived. Together these shortcomings would allow Silver Point to unilaterally make changes, they say.

FiberMark, a Brattleboro, Vt., producer of specialty fiber-based materials, filed for bankruptcy on March 30, 2004 in the U.S. Bankruptcy Court for the District of Vermont. Its Chapter 11 case number is 04-10463

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