Judge Mary Walrath (Bankr. D. Del.) confirmed Nov. 5 Zenith Electronics Corporation's prepackaged plan of reorganization.
"The equity committee challenged the fairness of the transaction because it was a 'going private' transaction where the majority shareholder would end up owning all of the equity after the restructuring," said Ronald Silverman of Bingham Dana, who represented the Ad hoc Bondholders Committee, which supported the plan. "But [in a 45-page opinion] the judge found that the restructuring was appropriate under federal and Delaware law. The decision was an important step in promoting efficient business restructurings through prepackaged bankruptcy cases."
Under the plan, which had the support of the majority of creditors, the company will become a wholly owned subsidiary of LG Electronics Inc. Zenith bondholders (current holders of the 103.5 million in principal amount of the 6-1/4 percent convertible subordinated debentures) will receive 50 million of new 8.19 percent senior debentures maturing in November 2009. All outstanding common stock, including that for which LGE paid 366 million, will be canceled and no stockholders will receive any distribution for their shares.
However, as Zenith's largest creditor, LGE has agreed to exchange 200 million of its claims for 100 percent of the newly issued equity of the reorganized Zenith. In exchange for other claims, LGE will receive certain operating assets and approximately 125 million in LGE New Restructured Senior Notes as part of Zenith's restructuring.
Zenith also has a commitment for a new, three-year 150 million credit agreement with a group of banks led by Citicorp North America Inc. These are the same lenders that provided Zenith with 150 million in debtor-in-possession financing over the past two months.
The Glenview, Ill.-based manufacturer of electronic entertainment products, filed its plan Aug. 23. The company says it now has the ability to "participate fully in the transition to digital television and HDTV." LGE, a manufacturer of consumer electronics with operations in 180 countries and annual sales of more that 9 billion, has been a majority stockholder of Zenith since November 1995.
The plan became effective Nov. 9.
James Sprayregen of Kirkland & Ellis in Chicago was lead counsel for Zenith. Steven Gross of Debevoise & Plimpton in New York was lead counsel for LG Electronics. Zenith senior vice president and general counsel is Richard Vitkus. In addition to Silverman, Michael Reilly and Robert Dombroff of Bingham Dana also represented the Ad hoc bondholders committee. Mark Thomas and Jeff Marwil of Katten Muchin represented the Equity Committee.