Company could emerge from Chapter 11 early next year
LINWOOD, Pa. — A U.S. Bankruptcy Court in Delaware has

approved a financing plan and disclosure statement for foam producer Foamex International, a move that could lead to the company’s emergence from Chapter 11 protection early next year.

Foamex Chairman Raymond Mabus Jr. called the approval “a significant milestone” in the Chapter 11 process, and said it means Foamex can begin soliciting support for its reorganization plan.

“This moves us closer to our ultimate goal of emerging from Chapter 11 as a stronger company, better positioned to compete in the marketplace,” Mabus said.

The court has scheduled a Jan. 18 hearing to consider confirmation of the reorganization plan, the company said.

Under terms of the plan, all secured and unsecured creditors, as well as the holders of Foamex bonds, will receive 100% of their allowed claims in cash. Existing common stockholders will keep their shares, but each share of preferred stock will be converted into 100 shares of common stock.

The company has commitments for up to $790 million in new loans and will raise $150 million in equity financing through a rights offering.

The offering gives common stockholders the right to buy up to 2.56 additional shares of common stock for each share currently owned. The new shares will cost $2.25 each.

If the rights offering fails to raise $150 million, several major stockholders – primarily equity investment firms – have agreed to buy more shares so that the full amount can be raised.

The disclosure statement estimates that slightly more than $13 million will be paid to unsecured creditors. The total doesn’t include five disputed claims totaling $3.74 million.

Foamex has been operating under Chapter 11 protection since September 2012.