Larry Thomas — Furniture Today
Debt holders would own company

ATLANTA — O’Sullivan Inds., which has been operating under Chapter 11 bankruptcy protection since October, has filed a reorganization plan with U.S. Bankruptcy Court here that would convert much of its debt into equity in the reorganized company.

Under the plan, which will be submitted to bondholders and unsecured creditors for a vote, O’Sullivan could emerge from bankruptcy protection in the next few months.

The ready-to-assemble furniture producer said the plan has the blessing of committees representing unsecured creditors and holders of its senior secured notes. In addition, the court has approved O’Sullivan’s amended disclosure statement, which consists of financial documents and other material supporting the reorganization plan.

“This is an important milestone in our Chapter 11 process and continues on our timeline to emerge from bankruptcy within the next few months,” said Rick Walters, interim CEO.

According to the plan, holders of approximately $108 million in senior secured notes would receive their prorated portion of 10 million shares of common stock in the reorganized O’Sullivan.

Holders of approximately $102 million worth of senior subordinated notes would receive their prorated portion of warrants for 526,316 shares of the new common stock.

O’Sullivan’s existing common shares would be cancelled when the reorganization plan takes effect and those shareholders would not receive any payments, according to the plan.

Unsecured creditors would receive 9% of their claim in cash, and could receive an additional 2% to 8% of the money they are owed if they agree to waive any future claims against the company.

Some 22 key employees would be entitled to bonus and retention payments totaling approximately $1.17 million. The plan says four members of senior management would receive payments equal to 37.5% of their annual salary, and the remaining 18 would get 25% of their salary.

Half the bonus and retention money would be paid no later than June 30, and the remainder would be paid 90 days after the first payment or Sept. 30, whichever is earlier.
  
Bankruptcy Judge C. Ray Mullins has scheduled a confirmation hearing on the plan for March 16.