Xerium to pick restructuring path based in part on certainty of outcome

By Jennifer Lanning Drey

Portland, Ore., March 25 - Xerium Technologies, Inc.'s decision on how it will proceed with its proposed restructuring will be based on the certainty of the outcome, the well-being of the company and Xerium's analysis of the most favorable result for all parties, Stephen R. Light, its chief executive officer, said Thursday during its fourth-quarter earnings conference call.

"We are very close to launching the completion of what has been quite a journey for us and our lenders," Light said.

As previously reported, the company launched a solicitation of lender votes earlier this month for a comprehensive restructuring of its debt in connection with an agreement in principle supported by the steering committee of lenders under its senior secured credit facility and the parties to its swap termination agreements.

Light said holders of 95.3% of the debt have voted in favor of the plan, while one bank holding 2.2% of the debt rejected it.

The remaining 2.5% of the debt had not voted as of March 24.

"I'm optimistic some of that debt will be located in the next few days and will vote in support of the plan, increasing the percentage of lenders in support of the plan even further," Light said.

Over the next few days, Xerium will be working to gain the support of the remaining debt, which would give the company the option of trying to amend its existing loan agreement and restructuring out of court or filing for court assistance with the restructuring.

The current support would allow Xerium to implement the restructuring plan through a court-supervised process, but the company needs a unanimous lender vote for reorganization without court supervision.

Xerium plans to choose a restructuring method by March 31.

Plan confirmation expected quickly

If implemented through a court restructuring, Xerium believes it could achieve confirmation of a plan of reorganization within a few weeks.

"During the process, only our two classes of lenders and one additional creditor will be impaired, making the case relatively simple and straightforward," Light said.

Additionally, the company does not expect any issues to arise between the two classes of lenders because they are receiving identical treatment, he said.

The company believes the recapitalization plan it has developed would provide ample long-term liquidity for the company to effectively compete against other companies also serving its customers, Light said.

Q4 sales down 11%

Xerium reported fourth-quarter net sales of $132.4 million, a more than 11% decrease from net sales for the 2008 fourth quarter of $149.5 million. Excluding currency effects, fourth-quarter net sales decreased by over 20% from the same period of 2008.

The net loss for the fourth quarter was $96.8 million, compared with a net loss of $4.3 million for the prior-year fourth quarter.

"Obviously, our expectations and plans for 2009, which we set in late 2008, did not turn out quite the way we expected," Light said.

Xerium is a Raleigh, N.C.-based manufacturer of industrial textiles and rolls used primarily in the paper production process.

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