By Jacqueline Palank
Chemical company Reichhold Inc. is seeking bankruptcy-court
approval to sell itself to its bondholders, subject to higher bids
at a January action.
The maker of resins filed court papers on Wednesday proposing a
Jan. 6 auction. It hopes to close a sale to the highest bidder,
whose offer must secure bankruptcy-court approval, by Jan. 30.
Reichhold's bondholders, including funds managed by Third Avenue
Management, J.P. Morgan Chase & Co. (JPM) and Black Diamond
Capital Management, have agreed to serve as stalking horse, or lead
bidder, at the Reichhold auction.
The bondholders, which as a group hold $255 million in
senior-secured notes issued before Reichhold's bankruptcy, also
have agreed to be part of a group that is extending $106.4 million
in bankruptcy financing to the company.
Through what is called a credit bid, the bondholders have
offered to forgive at least $15 million of that bankruptcy
financing in exchange for Reichhold's assets. Their bid also calls
for them to take responsibility for some of Reichhold's other
liabilities, including the remainder owed on the bankruptcy loan
and up to $14 million owed to the company's vendors.
As part of their bid, the bondholders could also contribute cash
to help the company wind down its operations.
Rival bids that top the bondholders' offer by at least $1
million would be due Dec. 30, under Reichhold's auction
proposal.
In court papers, Reichhold said the sale would preserve the jobs
of a "substantial portion" of employees.
Reichhold is asking the U.S. Bankruptcy Court in Wilmington,
Del., to hold a Dec. 2 hearing to consider its auction
proposal.
Based in Durham, N.C., Reichhold makes resins used in a wide
variety of products, such as bathtubs, wind turbine blades, wall
paints and protective coatings for airplanes and boats.
The company sought Chapter 11 protection on Sept. 30.
(Dow Jones Daily Bankruptcy Review covers news about distressed
companies and those under bankruptcy protection. Go to
http://dbr.dowjones.com)
Write to Jacqueline Palank at jacqueline.palank@wsj.com
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