|
|
|
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF SOUTH CAROLINA
IN RE: ) CHAPTER 11
)
POLYMER GROUP, INC., et al.,(1) ) CASE NO. 02-05773 (W)
) (JOINTLY ADMINISTERED)
)
DEBTORS. )
AMENDED MODIFIED DISCLOSURE STATEMENT FOR JOINT AMENDED MODIFIED
PLAN OF REORGANIZATION OF POLYMER GROUP, INC. AND ITS AFFILIATE DEBTORS
UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
--------------------------------------------------------------------------------
IMPORTANT DATES
- Date by which Ballots must be received: 5:00 p.m., E.S.T., December 20,
2002
- Date by which objections to Confirmation of the Amended Modified Plan must
be Filed and served: December 20, 2002
- Hearing on Confirmation of the Amended Modified Plan: 9:00 a.m., E.S.T.,
December 27, 2002
- Date by which objections to assumption of executory contracts and unexpired
leases must be Filed and served: December 20, 2002
James A. Stempel George B. Cauthen, District Court ID No. 81
Jonathan P. Friedland NELSON MULLINS RILEY
Roger J. Higgins & SCARBOROUGH, L.L.P.
Ryan S. Nadick Keenan Building, Third Floor
Ryan B. Bennett 1330 Lady St.
KIRKLAND & ELLIS P.O. Box 11070 (29211)
200 East Randolph Drive Columbia, SC 29201
Chicago, Illinois 60601 Telephone: (803) 799-2000
(312) 861-2000 Facsimile: (803) 256-7500
Co-Counsel for Polymer Group Inc., et al.
Dated: November 25, 2002
----------
(1) Debtors are the following entities: Polymer Group, Inc., PGI Polymer, Inc.,
Polymer Europe, Inc., Chicopee, Inc., FiberTech Group, Inc., Technetics Group,
Inc., Fibergol Corporation, Fabrene Corp., Fabrene Group LLC, PNA Corp., FNA
Polymer Corp., FNA Acquisition, Inc., Loretex Corporation, Dominion Textile
(USA) Inc., Poly-Bond Inc., FabPro Oriented Polymers, Inc., Polymer Asset
Management Company, Polymer Servicing Company, Pristine Brands Corporation;
PolyIonix Separation Technologies, Inc., Bonlam (S.C.), Inc.
{Page}
THE HOLDERS OF CLAIMS SHOULD NOT CONSTRUE THE CONTENTS OF THIS AMENDED MODIFIED
DISCLOSURE STATEMENT AS PROVIDING ANY LEGAL, BUSINESS, FINANCIAL OR TAX ADVICE
AND SHOULD CONSULT WITH THEIR OWN ADVISORS. FURTHERMORE, APPROVAL OF THIS
AMENDED MODIFIED DISCLOSURE STATEMENT BY THE BANKRUPTCY COURT DOES NOT
CONSTITUTE THE BANKRUPTCY COURT'S APPROVAL OF THE MERITS OF THE JOINT AMENDED
MODIFIED PLAN OF REORGANIZATION DISCLOSED HEREIN (THE "AMENDED MODIFIED PLAN").
THE SECURITIES DESCRIBED HEREIN WILL BE ISSUED GENERALLY IN RELIANCE ON THE
EXEMPTIONS SET FORTH IN SECTION 1145 OF THE BANKRUPTCY CODE AND WITHOUT
REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(COLLECTIVELY, THE "SECURITIES ACT"), OR ANY SIMILAR FEDERAL, STATE OR LOCAL
LAW.
THIS AMENDED MODIFIED DISCLOSURE STATEMENT HAS NOT BEEN APPROVED OR DISAPPROVED
BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THE STATEMENTS CONTAINED HEREIN.
THIS AMENDED MODIFIED DISCLOSURE STATEMENT SUMMARIZES CERTAIN PROVISIONS OF THE
MODIFIED PLAN, CERTAIN OTHER DOCUMENTS AND CERTAIN FINANCIAL INFORMATION. THE
DEBTORS BELIEVE THAT THESE SUMMARIES ARE FAIR AND ACCURATE. IN THE EVENT OF ANY
INCONSISTENCY OR DISCREPANCY BETWEEN A DESCRIPTION IN THIS AMENDED MODIFIED
DISCLOSURE STATEMENT AND THE TERMS AND PROVISIONS OF THE AMENDED MODIFIED PLAN
OR THE OTHER DOCUMENTS OR FINANCIAL INFORMATION TO BE INCORPORATED HEREIN BY
REFERENCE, THE AMENDED MODIFIED PLAN SHALL GOVERN FOR ALL PURPOSES.
THE STATEMENTS AND FINANCIAL INFORMATION CONTAINED HEREIN HAVE BEEN MADE AS OF
THE DATE HEREOF UNLESS OTHERWISE SPECIFIED. HOLDERS OF CLAIMS AND EQUITY
INTERESTS REVIEWING THIS AMENDED MODIFIED DISCLOSURE STATEMENT SHOULD NOT INFER
AT THE TIME OF THEIR REVIEW THAT THE FACTS SET FORTH HEREIN HAVE NOT CHANGED
UNLESS SO SPECIFIED HEREIN. EACH HOLDER OF A CLAIM OR EQUITY INTEREST SHOULD
CAREFULLY REVIEW THE AMENDED MODIFIED PLAN, THIS AMENDED MODIFIED DISCLOSURE
STATEMENT AND THE EXHIBITS TO BOTH DOCUMENTS IN THEIR ENTIRETY BEFORE CASTING A
BALLOT.
NO PARTY IS AUTHORIZED TO GIVE ANY INFORMATION ABOUT OR CONCERNING THE AMENDED
MODIFIED PLAN OTHER THAN THAT WHICH IS CONTAINED IN THIS AMENDED MODIFIED
DISCLOSURE STATEMENT. NO REPRESENTATIONS CONCERNING THE DEBTORS OR THE VALUE OF
THEIR PROPERTY HAVE BEEN AUTHORIZED BY THE DEBTORS OTHER THAN AS SET FORTH IN
THIS AMENDED MODIFIED DISCLOSURE STATEMENT. HOLDERS OF CLAIMS OR EQUITY
INTERESTS SHOULD NOT RELY UPON ANY INFORMATION, REPRESENTATIONS OR INDUCEMENTS
MADE TO OBTAIN ACCEPTANCE OF THE AMENDED MODIFIED PLAN THAT ARE OTHER THAN, OR
INCONSISTENT WITH, THE INFORMATION CONTAINED HEREIN AND IN THE AMENDED MODIFIED
PLAN.
ALTHOUGH THE DEBTORS HAVE USED THEIR BEST EFFORTS TO ENSURE THE ACCURACY OF THE
FINANCIAL INFORMATION PROVIDED IN THIS AMENDED MODIFIED DISCLOSURE STATEMENT,
THE FINANCIAL INFORMATION CONTAINED IN THIS AMENDED MODIFIED DISCLOSURE
STATEMENT HAS NOT BEEN AUDITED, EXCEPT FOR THE FINANCIAL STATEMENTS INCLUDED IN
POLYMER GROUP, INC.'S ANNUAL REPORT ON FORM 10-K INCLUDED AS EXHIBIT D HERETO.
i
{Page}
THE PROJECTIONS PROVIDED IN THIS AMENDED MODIFIED DISCLOSURE STATEMENT HAVE BEEN
PREPARED BY DEBTORS' MANAGEMENT. THESE PROJECTIONS, WHILE PRESENTED WITH
NUMERICAL SPECIFICITY, ARE NECESSARILY BASED ON A VARIETY OF ESTIMATES AND
ASSUMPTIONS WHICH, THOUGH CONSIDERED REASONABLE BY MANAGEMENT, MAY NOT BE
REALIZED AND ARE INHERENTLY SUBJECT TO SIGNIFICANT BUSINESS, ECONOMIC,
COMPETITIVE, INDUSTRY, REGULATORY, MARKET AND FINANCIAL UNCERTAINTIES AND
CONTINGENCIES, MANY OF WHICH WILL BE BEYOND THE REORGANIZED DEBTORS' CONTROL.
THE DEBTORS CAUTION THAT NO REPRESENTATIONS CAN BE MADE AS TO THE ACCURACY OF
THESE PROJECTIONS OR TO THE REORGANIZED DEBTORS' ABILITY TO ACHIEVE THE
PROJECTED RESULTS. SOME ASSUMPTIONS INEVITABLY WILL NOT MATERIALIZE.
FURTHERMORE, EVENTS AND CIRCUMSTANCES OCCURRING SUBSEQUENT TO THE DATE ON WHICH
THESE PROJECTIONS WERE PREPARED MAY DIFFER FROM THOSE ASSUMED. ALTERNATIVELY,
THESE EVENTS AND CIRCUMSTANCES MAY HAVE BEEN UNANTICIPATED, AND THUS MAY AFFECT
FINANCIAL RESULTS IN A MATERIALLY ADVERSE OR MATERIALLY BENEFICIAL MANNER. THE
PROJECTIONS, THEREFORE, MAY NOT BE RELIED UPON AS A GUARANTY OR OTHER ASSURANCE
OF THE ACTUAL RESULTS THAT WILL OCCUR.
SEE ARTICLE V OF THIS AMENDED MODIFIED DISCLOSURE STATEMENT, "RISK FACTORS", FOR
A DISCUSSION OF CERTAIN RISK FACTORS THAT A HOLDER OF AN IMPAIRED CLAIM OR
IMPAIRED EQUITY INTEREST SHOULD CONSIDER IN DECIDING WHETHER TO ACCEPT THE
AMENDED MODIFIED PLAN.
ALL EXHIBITS TO THIS AMENDED MODIFIED DISCLOSURE STATEMENT AND THE AMENDED
MODIFIED PLAN SUPPLEMENT ARE INCORPORATED INTO, AND ARE A PART OF, THIS AMENDED
MODIFIED DISCLOSURE STATEMENT AS IF SET FORTH IN FULL HEREIN.
THIS AMENDED MODIFIED DISCLOSURE STATEMENT CONSTITUTES A MOTION SEEKING ENTRY OF
AN ORDER SUBSTANTIVELY CONSOLIDATING THE CHAPTER 11 CASES SOLELY FOR THE LIMITED
PURPOSES OF ACTIONS ASSOCIATED WITH THE CONFIRMATION AND CONSOLIDATION OF THE
AMENDED MODIFIED PLAN, INCLUDING, BUT NOT LIMITED TO, VOTING, CONFIRMATION AND
DISTRIBUTION.
ii
{Page}
TABLE OF CONTENTS
{Table}
{Caption}
PAGE
----
{S} {C}
I. GENERAL INFORMATION............................................................................................9
A. DESCRIPTION OF DEBTORS' BUSINESS................................................................9
1. Corporate Structure....................................................................9
2. The Debtors' Businesses................................................................9
B. SUMMARY DESCRIPTION OF EACH DEBTOR.............................................................11
1. Polymer Group, Inc....................................................................11
2. Bonlam (S.C.), Inc....................................................................11
3. Chicopee Inc..........................................................................11
4. PGI Polymer, Inc......................................................................11
5. Fabrene Corp..........................................................................12
6. Dominion Textile (USA) Inc............................................................12
7. Loretex Corporation...................................................................12
8. FabPro Oriented Polymers, Inc.........................................................12
9. PGI Asset Management Company..........................................................12
10. PGI Servicing Company.................................................................12
11. Fabrene Group LLC.....................................................................13
12. FiberTech Group, Inc..................................................................13
14. FiberGol Corporation..................................................................13
15. PNA Corp..............................................................................13
16. FNA Polymer Corp......................................................................13
17. FNA Acquisition, Inc..................................................................13
18. Poly-Bond, Inc........................................................................13
19. Pristine Brands Corporation...........................................................14
20. PolyIonix Separation Technologies, Inc................................................14
21. PGI Europe............................................................................14
C. SUMMARY OF CAPITAL STRUCTURE...................................................................14
1. Old Polymer Common Stock..............................................................14
2. Polymer Group, Inc., Common Stock Price History.......................................14
3. Warrants and Options..................................................................15
4. Dominion Senior Notes.................................................................15
5. Senior Subordinated Notes.............................................................15
D. THE DEBTORS' PREPETITION CREDIT FACILITY.......................................................16
E. THE DEBTORS' ASSETS............................................................................17
F. EVENTS LEADING TO THE CHAPTER 11 CASES.........................................................17
G. THE PREPETITION NEGOTIATIONS AND THE FINANCIAL RESTRUCTURING...................................18
H. THE INVOLUNTARY PETITION.......................................................................19
I. THE PREARRANGED PLAN...........................................................................20
J. OVERVIEW OF THE AMENDED MODIFIED PLAN..........................................................21
K. PURPOSE OF THE AMENDED MODIFIED PLAN...........................................................23
L. LIMITED REQUEST FOR SUBSTANTIVE CONSOLIDATION..................................................24
M. TERMS OF THE NEW POLYMER COMMON STOCK TO BE ISSUED PURSUANT TO THE AMENDED MODIFIED PLAN.......24
N. MATERIAL TERMS OF THE CONVERTIBLE NOTES AND NEW SENIOR SUBORDINATED NOTES......................25
O. BOARD OF DIRECTORS OF THE REORGANIZED DEBTORS..................................................25
P. LIQUIDATION ANALYSIS...........................................................................27
Q. FINANCIAL PROJECTIONS AND VALUATION ANALYSIS...................................................28
{/Table}
i
{Page}
{Table}
{S} {C}
1. Financial Projections.................................................................28
2. Valuation.............................................................................29
R. REORGANIZED DEBTORS............................................................................31
II. THE CHAPTER 11 CASES.........................................................................................32
A. MOTIONS FILED..................................................................................32
1. Motion of the Debtors for Entry of an Order, Under Fed. R. Bankr. P.
1015(b), Directing Joint Administration and Supporting Memorandum
of Law (the "Joint Administration Motion")............................................32
2. Motion of the Debtors to Change Divisional Venue from Charleston to
Columbia, South Carolina (the "Motion to Change Divisional Venue")....................32
3. Motion for Order Granting the Debtors Additional Time Within Which to
File Schedules and Statements and Supporting Memorandum of Law........................33
4. Applications for Retention of Debtors' Professionals..................................33
5. Motion for Authority to Pay Prepetition Employee Wages and Associated
Benefits..............................................................................33
6. Application of the Debtors for Entry of an Order Pursuant to 11 U.S.C.
Sections 1107(a) and 1108 Authorizing the Debtors to Employ and
Compensate Certain Professionals Utilized in the Ordinary Course of the
Debtors' Business and Supporting Memorandum of Law....................................33
7. Motion of the Debtors for Entry of an Administrative Order Under 11
U.S.C. Sections 105(a) and 331 Establishing Procedures for Interim
Compensation and Reimbursement of Expenses for Professionals and
Official Committee Members and Supporting Memorandum of Law...........................33
8. Motion to Continue Customer Programs..................................................34
9. Motion to Maintain the Debtors' Prepetition Cash Management System and
Existing Bank Accounts................................................................34
10. Motion of the Debtors for Entry of an Order Authorizing the Debtors to
Pay Sales, Use, Franchise and other Similar Taxes and Certain Other
Charges and Supporting Memorandum of Law..............................................34
11. Motion of the Debtors for Entry of an Order (A) Deeming Utilities
Adequately Assured of Future Performance and (B) Establishing a
Procedure for Determining Adequate Assurances Pursuant to 11 U.S.C.
Section 366 and Supporting Memorandum of Law..........................................34
12. Motion of the Debtors for an Order, Under 11 U.S.C. Sections 105(a),
503(b), 546(c) and 546(g), (A) Establishing Procedure for Treatment of
Valid Reclamation Claims and (B) Prohibiting Third Parties from
Interfering with Delivery of the Debtors' Goods and Supporting
Memorandum of Law.....................................................................34
13. Motion for Entry of an Order Pursuant to 11 U.S.C. Sections 365 and 554
Authorizing and Approving the Rejection of Certain Executory Contracts
and Unexpired Leases and Authorizing the Abandonment of Property of the
Debtors and Supporting Memorandum of Law..............................................35
14. Motion of the Debtors for Authority to (A) Maintain Existing Insurance
Policies, (B) Pay Pre Petition Insurance Premiums, and (C) Enter into
Post-Petition Premium Financing Agreements and Supporting Memorandum of
Law...................................................................................35
15. Motion for Authority to Pay Prepetition Essential Trade Creditors.....................35
16. Motion for DIP Financing and Cash Collateral..........................................35
17. Motion to Pay Prepetition Shippers, Warehousemen and Customs Brokers..................35
18. Motion for Authority to Implement a Key Employee Retention Program....................35
{/Table}
ii
{Page}
{Table}
{S} {C}
19. Motion for Examiner...................................................................36
20. Application for Sale of Chicopee Real Property........................................36
B. COMMITTEE......................................................................................36
C. BAR DATE.......................................................................................36
D. LITIGATION AND THE AUTOMATIC STAY..............................................................37
1. Southern Industrial Constructors, Inc. v. Chicopee, Inc. and Polymer
Group, Inc. Case No. 5:00-cv-809-BO(2) (E.D. N.C.)...................................37
2. Lemelson Medical, Education & Research Foundation, Limited Partnership
v. R.R. Donnelley & Sons Co., et al. (Defendant No. 52 - Polymer Group,
Inc.). Case No. CIV000664PHX (ROS) (D. Ariz).........................................37
3. HMKR, Inc., et al. v. Polymer-FNA Mooresville, NC Case No. 99-B-10968
(RLB) (Bankr. S.D.N.Y.)...............................................................37
4. Robertson Airtech, International, Inc. v. Southern Industrial
Contractors, Inc., Chicopee, Inc., Polymer Group, Inc., et al. Case No.
EQ2001-6302 (Circuit Court of Pulaski County, Arkansas)...............................37
5. USPTO Interference No. 104,781........................................................37
6. The McCullough Litigation.............................................................37
7. Bobbie Jo Cooke v. The Hudson-Sharp Machine Company, Chicopee, Inc.
Case No. 01-2116 (W.D. Pa.)...........................................................38
8. Discrimination Cases..................................................................38
9. Darrel Mertens v. Polymer Group, Inc. Case No. 26035-02W.............................38
10. ARL International, Ltd. v. Polymer Group, Inc. Case No. BC266746.....................38
11. Cobale Co., L.L.C. v. Ausimont USA, Inc. and Polymer Group, Inc.
Case No. 02-276-D-M3..................................................................38
12. FNA Polymer Corp. and Poly-Bond Incorporated v. Ash-Kourt Fabrics, Inc.
Case No. 00-CVS 852...................................................................38
III. THE AMENDED MODIFIED PLAN OF REORGANIZATION.................................................................39
A. OVERVIEW OF CHAPTER 11.........................................................................39
B. OVERALL STRUCTURE OF THE AMENDED MODIFIED PLAN.................................................40
C. CLASSIFICATION AND TREATMENT OF CLAIMS AND EQUITY INTERESTS....................................40
1. Treatment of Unclassified Claims......................................................40
2. Classification and Treatment of Claims and Equity Interests...........................41
D. PROVISIONS GOVERNING DISTRIBUTIONS UNDER THE AMENDED MODIFIED PLAN.............................46
1. Manner of Payment.....................................................................46
2. Distributions for Claims Allowed as of the Effective Date.............................46
3. Delivery of Distributions and Undeliverable or Unclaimed Distributions................46
4. Record Date Distribution Notification Date............................................47
5. Timing and Calculation of Amounts to be Distributed...................................47
6. De Minimis and Fractional Distributions...............................................47
7. Setoffs...............................................................................47
8. Surrender of Canceled Instruments or Securities.......................................48
9. Lost, Stolen, Mutilated or Destroyed Instruments or Securities........................48
10. Preservation of Subordination Rights..................................................48
E. PROCEDURES FOR RESOLVING DISPUTED, CONTINGENT AND UNLIQUIDATED CLAIMS OR EQUITY
INTERESTS......................................................................................49
1. Prosecution of Objections to Claims...................................................49
2. Estimation of Claims..................................................................49
3. Payments and Distributions on Disputed Claims.........................................49
4. Allowance of Claims...................................................................49
F. MEANS FOR IMPLEMENTING THE AMENDED MODIFIED PLAN...............................................50
1. Continued Corporate Existence.........................................................50
2. Corporate Governance and Corporate Action.............................................50
3. Cancellation of Securities And Agreements.............................................52
{/Table}
iii
{Page}
{Table}
{S} {C}
4. Issuance of New Polymer Common Stock and New Polymer Notes............................52
5. Revesting Of Assets; Releases of Liens................................................53
6. Sources of Cash for Plan Distribution.................................................53
7. Exit Revolving Financing Facility.....................................................53
8. New Investment........................................................................53
9. Compensation And Benefit Programs.....................................................55
10. Restructuring Transactions............................................................55
11. Scope of Requested Limited Substantive Consolidation..................................55
G. TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES..........................................57
1. Assumption of Executory Contracts and Unexpired Leases................................57
2. Rejection Claims; Cure of Default.....................................................57
3. Indemnification of Directors, Officers and Employees..................................58
H. ACCEPTANCE OR REJECTION OF THE AMENDED MODIFIED PLAN...........................................58
1. Voting Classes........................................................................58
2. Acceptance by Impaired Classes........................................................58
3. Presumed Acceptance of the Amended Modified Plan......................................58
4. Presumed Rejection of the Amended Modified Plan.......................................58
5. Non-Consensual Confirmation...........................................................58
I. CONFIRMATION AND EFFECTIVENESS OF THE AMENDED MODIFIED PLAN....................................59
1. Conditions Precedent to Confirmation..................................................59
2. Conditions Precedent to Consummation..................................................59
3. Conditions Precedent to Closing of New Investment.....................................59
4. Waiver of Conditions Precedent........................................................60
5. Effect of Non-Occurrence of Consummation..............................................60
J. EFFECT OF PLAN CONFIRMATION....................................................................60
1. Certain Mutual Releases...............................................................60
2. Limited Releases by Holders of Equity Interests and Claims............................61
3. Preservation of Causes of Action......................................................62
4. Exculpation...........................................................................63
5. Injunction............................................................................63
6. Discharge of Claims and Termination of Equity Interests...............................63
K. SUMMARY OF OTHER PROVISIONS OF THE AMENDED MODIFIED PLAN.......................................64
1. Retention of Jurisdiction.............................................................64
2. Exemption from Certain Transfer Taxes.................................................65
3. Effectuating Documents, Further Transactions and Corporate Action.....................65
4. Applicability of Federal and Other Securities Laws to the New Securities
to Be Distributed Under the Amended Modified Plan.....................................65
5. Transferability of Subscription Rights................................................67
6. Modification of the Amended Modified Plan.............................................67
7. Revocation of the Amended Modified Plan...............................................68
8. Dissolution of Creditors Committee....................................................68
9. Payment of Statutory Fees.............................................................68
10. Reservation of Rights.................................................................68
IV. VOTING AND CONFIRMATION PROCEDURE............................................................................68
A. VOTING INSTRUCTIONS............................................................................68
B. VOTING TABULATION..............................................................................70
C. SPECIAL VOTING PROCEDURES FOR HOLDERS OF THE SENIOR SUBORDINATED NOTES, DOMINION
NOTES AND COMMON STOCK AND SPECIAL ELECTION PROCEDURES FOR HOLDERS OF ALLOWED
CLASS 4 CLAIMS.................................................................................71
1. Beneficial Holders....................................................................71
2. Nominees..............................................................................72
3. Elections by Class 4 Claim Holders....................................................72
D. THE CONFIRMATION HEARING.......................................................................73
{/Table}
iv
{Page}
{Table}
{S} {C}
E. STATUTORY REQUIREMENTS FOR CONFIRMATION OF THE AMENDED MODIFIED PLAN...........................73
1. Best Interests of Creditors Test/Liquidation Analysis.................................74
2. Feasibility...........................................................................75
3. Acceptance by Impaired Classes........................................................75
4. Confirmation Without Acceptance by All Impaired Classes...............................76
V. RISK FACTORS..................................................................................................76
A. CERTAIN BANKRUPTCY CONSIDERATIONS..............................................................77
B. FACTORS AFFECTING THE VALUE OF THE SECURITIES TO BE ISSUED UNDER THE AMENDED
MODIFIED PLAN..................................................................................78
C. RISKS RELATING TO THE OPERATIONS OF THE REORGANIZED DEBTORS....................................79
VI. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS......................................................82
A. CONSEQUENCES TO HOLDERS OF ALLOWED CLASS 4 CLAIMS..............................................83
1. Exchange of Class 4 Claims for New Polymer Common Stock...............................83
2. Accrued But Unpaid Interest...........................................................84
3. Market Discount.......................................................................85
4. Consequences to Non-United States Holders of Class 4 Claims...........................85
B. CONSEQUENCES TO HOLDERS OF CLASS 2 CLAIMS......................................................85
C. CONSEQUENCES TO HOLDERS OF CLASS 6 CLAIMS......................................................86
D. CONSEQUENCES TO THE COMPANY....................................................................87
1. Cancellation of Indebtedness Income...................................................87
2. Limitation on Net Operating Losses and Other Tax Attributes...........................87
3. Alternative Minimum Tax...............................................................89
4. Backup Withholding and Information Reporting..........................................89
VII. MISCELLANEOUS PROVISIONS....................................................................................90
A. PENDING LITIGATION.............................................................................90
B. SUCCESSORS AND ASSIGNS.........................................................................90
C. RESERVATION OF RIGHTS..........................................................................90
D. SERVICE OF DOCUMENTS...........................................................................90
VIII. RECOMMENDATION.............................................................................................90
{/Table}
v
{Page}
EXHIBITS
Exhibit A - The Debtors' Joint Amended Modified Plan of Reorganization,
Filed by Polymer Group, Inc., and its Affiliate Debtors
Exhibit B - Liquidation Analysis
Exhibit C - Financial Projections
Exhibit D - Annual Report on Form 10-K for the year ended December 29,
2001, as amended
Exhibit E - Quarterly Report on Form 10-Q for the quarter ended September
28, 2002
Exhibit F - List of Executory Contracts and Unoccupied Leases to be
Rejected
Exhibit G - The term sheet dated as of May 8, 2002, between Polymer Group,
Inc. and certain lenders party thereto, as amended by the
Supplement to Summary Terms and Conditions (together, the
"Bank Term Sheet")
Exhibit H - Organizational Chart of Polymer Group, Inc. and Its
Subsidiaries
Exhibit I - Summary Description of the Assets, Liabilities and Principal
Claims Against the Debtors
Exhibit J - Summary of Material Terms of New Polymer Notes, New Polymer
Common Stock and Series A and Series B Warrants
Exhibit K - List of Holders of General Unsecured Claims
Exhibit L Letter of Jerry Zucker
Exhibit M Letter of James G. Boyd
vi
{Page}
SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements contained elsewhere in this Amended
Modified Disclosure Statement.
Polymer Group, Inc. ("Polymer") and its twenty domestic affiliates
(collectively, the "Debtors" or the "Company") are leading manufacturers of
nonwoven and oriented polymer products that their customers use to manufacture a
wide range of commercial, consumer and other products. On March 25, 2002, six
holders of approximately $41.3 million of Polymer's Senior Subordinated Notes as
defined below (the "Petitioning Creditors") Filed an involuntary chapter 11
petition in the United States Bankruptcy Court for the District of South
Carolina (the "Bankruptcy Court"). This petition was subsequently dismissed on
April 26, 2002. On May 11, 2002 (the "Petition Date"), the Debtors (other than
Bonlam (S.C.), Inc., for which the petition date was April 23, 2002) Filed
voluntary petitions for reorganization under chapter 11 of title 11 of the
United States Code (the "Bankruptcy Code") in the Bankruptcy Court
(collectively, the "Chapter 11 Cases"). Contemporaneously therewith, the Debtors
Filed a motion to jointly administer the Chapter 11 Cases for procedural
purposes only.
Pursuant to sections 1107(a) and 1108 of the Bankruptcy Code, the
Debtors continue to operate their businesses and manage their properties as
debtors-in-possession during the pendency of the Chapter 11 Cases. The Debtors'
customers continue to receive shipments of the Debtors' products and the
Debtors' suppliers continue to be paid in full according to applicable payment
terms. In this regard, the Chapter 11 Cases are expected to only minimally
affect the Debtors' operating businesses.
An official committee of unsecured creditors (the "Committee") was
appointed on May 17, 2002.
On June 14, 2002, the Debtors Filed a plan of reorganization (the
"Prearranged Plan") and a disclosure statement pursuant to a term sheet dated
May 10, 2002 (the "Prearranged Plan Term Sheet"). On August 20, 2002, the
Bankruptcy Court approved the Debtors' disclosure statement, whereupon the
Debtors began the solicitation of votes to accept or reject the Prearranged
Plan. On November 12, 2002, the Committee, MatlinPatterson Global Opportunities
Partners L.P. ("GOF") and the steering committee of Senior Lenders (the "Senior
Lenders Steering Committee") each indicated that they would support a modified
plan of reorganization with terms different from those of the Prearranged Plan
(the "Modified Plan"). The Debtors Filed the Modified Plan and accompanying
disclosure statement on November 14, 2002. The Debtors subsequently Filed an
amended modified plan (the "Amended Modified Plan") and accompanying disclosure
statement (the "Amended Modified Disclosure Statement") on the date hereof.
The Debtors are furnishing this Amended Modified Disclosure Statement
as the proponents of the Amended Modified Plan pursuant to section 1125 of the
Bankruptcy Code and in connection with the solicitation of votes (the
"Solicitation") to accept or reject the Amended Modified Plan, as it may be
amended or supplemented from time to time in accordance with the Bankruptcy Code
and the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules").
CAPITALIZED TERMS USED HEREIN BUT NOT OTHERWISE DEFINED HEREIN SHALL HAVE THE
MEANINGS GIVEN TO SUCH TERMS IN THE AMENDED MODIFIED PLAN.
This Amended Modified Disclosure Statement describes certain aspects of
the Amended Modified Plan, the Debtors' operations, their financial condition,
including financial projections, as well as other related matters, including the
treatment of holders (each, a "Holder" and collectively, the "Holders") of
Polymer's two series of existing senior subordinated notes (respectively, as
defined more fully herein, the "9% Notes" and the "8 3/4% Notes", together, the
"Senior Subordinated Notes") and its common stock (the "Old Polymer Common
Stock"). The Chapter 11 Cases will not affect the Debtors' critical business
relations and intercompany claims (but will affect the rights of the Debtors'
prepetition senior secured lenders (the "Senior Lenders") and the Holders of
general unsecured claims, including Senior Subordinated Notes and Old Polymer
Common Stock). The Chapter 11 Cases also will not affect the Debtors' assets,
strategy and ongoing operations.
EVENTS LEADING TO, AND DURING, THE CHAPTER 11 CASES
The Debtors operate their businesses in two divisions, the "Nonwovens
Division" and the "Oriented Polymers Division", which market their products
primarily to customers who use the Company's products as components of their own
products. After continuously growing and performing at or above market
projections and expectations for four successive years during the late 1990's,
the Debtors failed to meet expectations for their fiscal 2000 and fiscal 2001
results. The Debtors' consolidated net sales were approximately $816 million for
fiscal 2001, a decrease of 5.4% from consolidated net sales of $862 million for
fiscal 2000. The primary factors driving recent shortfalls include significantly
increased raw material prices, the majority of which could not be passed on to
customers, excess capacity and supply for certain products,
{Page}
the longer-than anticipated commercialization period for certain new products,
such as APEX(R), and increased interest rate expenses due to a higher average
amount of indebtedness outstanding resulting from increased capital spending.
As a result, the Debtors defaulted under certain covenants of Polymer's
Second Amended, Restated and Consolidated Credit Agreement, dated as of July 3,
1997, as amended through and including Amendment No. 7 (the "Prepetition Credit
Facility"). The Debtors have continued to make all payments of principal and
interest under the Prepetition Credit Facility. The Prepetition Credit Facility
currently provides for secured revolving credit borrowings, term loans, and
letters of credit with aggregate commitments of up to $600 million. As of
December 29, 2001, approximately $484 million (excluding letter of credit
exposure) was outstanding under the Prepetition Credit Facility. A bank group,
the agent for which is JP Morgan Chase Bank (the "Prepetition Agent"), provides
the Prepetition Credit Facility, which is secured by liens on substantially all
of the Debtors' assets. After the occurrence of this default, the Prepetition
Agent, on behalf of the Senior Lenders, exercised its right to block the payment
of interest due to the holders of the 9% Notes on January 2, 2002, and later
exercised its right to block the interest payment due to the holders of the
8 3/4% Notes on March 1, 2002.
These factors, among others, led the Debtors to negotiate the terms of
the Prearranged Plan with the Senior Lenders Steering Committee and, GOF, the
principal Holder of the Senior Subordinated Notes. During the course of these
negotiations, GOF informed the Debtors that it held or controlled approximately
67% of the Senior Subordinated Notes. Pursuant to these negotiations, the Senior
Lenders agreed to the terms and conditions of a restructuring of the Prepetition
Credit Facility and GOF entered into an agreement with the Debtors to support
the Prearranged Plan, dated as of May 10, 2002.
Subsequent to the Bankruptcy Court's approval on August 21, 2002, of
the Debtors' disclosure statement for the Prearranged Plan, the Debtors, the
Committee and GOF (the "Plan Parties") agreed to modify the terms of the
Prearranged Plan.
THE COMMITTEE, WHICH REPRESENTS ALL THE UNSECURED CREDITORS, INCLUDING
HOLDERS OF THE SENIOR SUBORDINATED NOTES, HAS RECOMMENDED THAT ALL GENERAL
UNSECURED CREDITORS VOTE TO ACCEPT THE AMENDED MODIFIED PLAN. LIKEWISE, THE
SENIOR LENDERS STEERING COMMITTEE HAS RECOMMENDED THAT THE SENIOR LENDERS VOTE
TO ACCEPT THE AMENDED MODIFIED PLAN. IN ADDITION, GOF, THE HOLDER OF IN EXCESS
OF 67% OF THE OUTSTANDING PRINCIPAL AMOUNT OF THE SENIOR SUBORDINATED NOTES, HAS
INDICATED ITS INTENT TO VOTE TO ACCEPT THE AMENDED MODIFIED PLAN.
The Amended Modified Plan will restructure Polymer's public debt by
providing a capital structure that can be supported by the Reorganized Debtors'
cash flow. To this end, the Amended Modified Plan will reduce Polymer's debt and
accrued interest by more than $633.7 million and its future annual interest
expense by approximately $53 million (less any increases in interest costs under
the Restructured Facilities). The Debtors believe that the Amended Modified
Plan's contemplated reorganization is in the best interests of their creditors
and equity holders. If the Amended Modified Plan is not confirmed, the Debtors
believe that they will be forced to either File an alternate plan of
reorganization or to liquidate under chapter 11 or chapter 7 of the Bankruptcy
Code. In either event, the Debtors believe that their unsecured creditors
|
End of Preview |
Home Intelligence Services Subscriptions News About Us