Applied Extrusion Technologies Inc. has struck a deal that will send it into Chapter 11 reorganization, but allow it to emerge quickly as a private company controlled by its senior lenders.
The company missed a bond payment July 1, and had a 30-day grace period to respond. On July 30, the New Castle, Del.-based firm announced it had an agreement in principle with six bondholders representing 70 percent of its senior notes.
The plan would send AET into a pre-packaged Chapter 11 in which the company and the bondholders would exchange notes carrying a 10.75 percent rate for all of the common equity in a reorganized company. AET will cancel its existing publicly held stock with shareholders receiving a portion of $2.5 million in cash. Trade creditors will be paid in full.
AET officials expect the company to be in Chapter 11 for less than 60 days before re-emergence as a private entity.
``We are very pleased that we have been able to reach agreement with holders of a substantial majority of our senior notes,'' Chairman and Chief Executive Officer Amin J. Khoury said in a written statement.
``This recapitalization will significantly reduce debt and restore the long-term financial stability of the company.''
The bankruptcy move is not certain, though. Executives stated they have ``no assurance that sufficient votes of holders of senior notes ... will be obtained to confirm a prepackaged Chapter 11 plan.''
An extruder of oriented polypropylene film for the packaging industry, AET listed $361 million in long-term debt at the end of its last fiscal year, in September 2003, according to its annual report filed with the Securities and Exchange Commission. The debt represented 94 percent of its total capitalization.
AET posted $247.3 million in sales for 2002-03, with a net loss of $15.9 million. It last posted a net profit in 1997 of nearly $1.4 million.
The value of AET's stock has tumbled this year from a 52-week high of $3.75 early in 2004 to 30 cents on July 29. The share price dropped below $1 in May, prompting the New York Stock Exchange to threaten to delist the firm.
GE Commercial Finance already has extended financing for the company.