Constar International Inc. (NASDAQ: CNST) today announced that it reached agreement with the holders of more than 75% of the Company's Senior Secured Floating Rate Noteholders regarding the terms of a consensual restructuring transaction that will significantly deleverage its balance sheet. A subgroup of the Noteholders have also committed to provide $55 million of debtor in possession financing to permit the Company to continue to operate in the ordinary course of business during the pendancy of its restructuring, which will take place through implementation of a pre-arranged chapter 11 case. In addition, Constar has obtained a commitment from Wells Fargo Capital Finance, LLC, for a working capital facility that will come into existence upon Constar's emergence from chapter 11, anticipated to be early in the second quarter of 2011.
The restructuring plan calls for, among other things, a reduction of the Company's current debt level of $220 million by approximately $135 million to $150 million, with a significant corresponding reduction in cash interest. To implement this prearranged restructuring, Constar and certain of its subsidiaries today filed voluntary petitions for reorganization under Chapter 11 in the U.S. Bankruptcy Court in Wilmington, Delaware.
All of Constar's global operations - including all of its manufacturing and distribution facilities in the U.S. and Europe - are open and operating on normal schedules, and the Company expects to continue to fulfill all customer orders as usual and provide uninterrupted customer service.
Grant Beard, President and CEO of Constar, said, Today we have announced a significant step forward for Constar. Having received the support from the holders of approximately 75% of our Noteholders for a pre-arranged and consensual restructuring, we will significantly improve our balance sheet. Upon emergence from reorganization, we will carry new term debt of not more than $85 million and commensurately reduce annual cash interest obligations. This is noteworthy in that it frees up cash to reinvest in our business to support future growth. We intend to continue to operate as usual during the restructuring process with minimal disruption to the business.
Pursuant to the Company's proposed plan of reorganization, Noteholders will convert 100% of the face amount of the current notes into new term debt in the face amount of $70 million and convertible preferred stock of $30 million, and will become the majority owners of the new common stock. Under the proposed plan, the Company's general unsecured claims will be converted to equity, and the current equity will be cancelled. The Company anticipates that the restructuring will be completed by late spring of 2011, subject to court approval.
The Company's financial advisor is Greenhill & Co. and its legal advisor is Wilmer Cutler Pickering Hale and Dorr LLP. The Ad Hoc Group of Noteholders is represented by Kirkland & Ellis LLP. Wells Fargo Capital Finance, LLC is represented by Otterbourg, Steindler, Houston & Rosen, P.C.
| Mark Borseth Executive Vice President and Chief Financial Officer Tel: +1 (215) 552-3772 |
