Falcon files prepackaged Chapter 11

New York, Jan. 31 - Falcon Products, Inc. said it made a prepackaged filing for Chapter 11 on Monday after reaching an agreement with holders of a majority of its senior subordinated notes on a restructuring.

Under the plan, $100 million of the company's senior subordinated notes will be converted into stock.

In addition, holders of the senior subordinated notes will be able to participate in a $45 million rights offering to further reduce the company's debt.

Overall, the plan will cut debt by $145 million and reduce annual interest expense by $17 million.

The group of noteholders leading the restructuring includes Oaktree Capital Management, LLC and Whippoorwill Associates, Inc., Falcon said.

Holders of Falcon's existing junior convertible securities, common stock and outstanding warrants will receive 2.5% of the common stock of the reorganized company, subject to dilution.

"The restructuring will dramatically deleverage the company's balance sheet, significantly reducing interest costs," said Frank Jacobs, Falcon's chief executive officer, in a news release. "{The restructuring will allow us to build a stronger company positioned so that we can effectively compete in the future. The results will be beneficial to our key constituencies including our customers, vendors, employees and stakeholders."

Falcon, a St. Louis manufacturer of commercial furniture, has obtained a commitment for $45 million of debtor-in-possession financing from some of its existing lenders, including funds and accounts managed by DDJ Capital Management, LLC and Mast Capital Management, LLC.

Proceeds from the DIP facility will be used to repay Falcon's existing revolver with Fleet Capital Corp. and to provide additional liquidity.

DDJ and Mast have also committed to an exit facility.

In its filing with the U.S. Bankruptcy Court for the Eastern District of Missouri, Falcon listed assets of $264.042 million and liabilities of $252.027 million.

The largest unsecured creditor was listed as Bank of New York, trustee for $100 million of 11 3/8% senior subordinated notes due 2009. Following was Oaktree Capital Management, LLC of Los Angeles with $37 million of note claims, Whippoorwill Associates, Inc. of White Plains, N.Y., with $25.75 million of notes and Dalton Investments of Los Angeles with $10 million of notes. All other claims were less than $1 million, the largest being Bryan Cave LLP of St. Louis with a $629,000 trade claim.

Falcon's case number is 05-41108.

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