Pliant details debt restructuring agreement; Dec. 1 note payment to be paid by $20 million tack-on issue

By Caroline Salls

Pittsburgh, Dec. 7 - Pliant Corp. released details on its agreement in principle with a committee representing the holders of its 13% senior subordinated notes and with a majority of the company's current equity holders on the terms of a debt restructuring, according to Tuesday filing with the Securities and Exchange Commission.

The agreement calls for either an out-of-court exchange offer with a minimum 97% acceptance threshold, a pre-packaged Chapter 11 filing or a pre-negotiated Chapter 11 filing.

Under the agreement, the Dec. 1 interest payment on the 13% notes will be paid by the company's issuance of $20 million in tack-on first-lien notes.

In addition to the tack-on notes, holders of the old notes will receive, in full satisfaction of their notes, $260 million of series AA exchangeable redeemable preferred stock or 77.5% of the total preferred stock issue and 30% of the fully diluted common equity, calculated following the conversion of the series A preferred stock into common equity.

The remainder of the common equity will be divided between holders of Pliant's series A preferred stock and old equity.

The existing series A preferred stock will convert into $75.5 million of series AA exchangeable redeemable preferred stock, of 22.5% of the total series AA issue and into new common equity.

Existing common shares will remain outstanding.

Holders of old series A stock and old equity will receive 70% of the new common equity.

Existing series B preferred stock held by management will be canceled. A new series M preferred stock will be created as a management incentive to maximize the value of the restructured company.

Holders of the series M preferred stock will also be entitled to 8% of the equity value of the restructured company.

A total of $335.56 million of the series AA preferred stock will be issued and will pay dividends in kind quarterly at 13%.

The company has the option to redeem it at any time at principal plus accrued dividends.

Holders will have the ability to force an initial public offering after three years and sale of the company after four years.

If the series AA preferreds are not redeemed within five years after issuance, the holders of a majority of the preferreds will be able to convert the entire issue into 99.9% of the company's common stock.

Each holder of the old notes who consents to the proposed restructuring and votes in favor of a plan of reorganization that implements the proposed restructuring will receive a cash consent fee equal to 1% of the principal amount of old notes they hold.

If the restructuring is implemented through a Chapter 11 proceeding and the bankruptcy court determines that issuance of the tack-on notes would result in an impairment of the first- or second-lien noteholders, then the company will instead issue new unsecured subordinated notes permitted by the first- and second-lien indenture in an amount reasonably equivalent to the face value of the tack-on notes.

In addition, if the restructuring is implemented through a Chapter 11 proceeding and the bankruptcy court determines that payment of the consent fee would result in an impairment of the first- and second-lien noteholders, then the series AA preferred stock will be split between holders of the old notes and holders of the existing series A preferred stock, with 80% to go to the old noteholders and 20% to the preferred stockholders.

In this case, the consent fee would be eliminated.

Also under the agreement, the restructured company's board of directors will consist of seven members, four to be appointed by old equityholders and two by senior subordinated noteholders. The company's chief executive officer will retain his current board seat.

Pliant is a Schaumburg, Ill., producer of film and flexible packaging products.

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