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UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
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:
: Chapter 11
In re: :
: Case No. 02- 12986 (MFW)
GENTEK INC., et al., :
and NOMA COMPANY, :
: Jointly Administered
Debtors. :
x
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DISCLOSURE STATEMENT WITH RESPECT TO
JOINT PLAN OF REORGANIZATION UNDER CHAPTER 11, TITLE 11,
UNITED STATES CODE OF GENTEK INC., ET AL., AND NOMA COMPANY, DEBTORS
D. J. Baker Domenic E. Pacitti (I.D. No. 3989)
Rosalie Walker Gray J. Kate Stickles (I.D. No. 2917)
Adam S. Ravin SAUL EWING LLP
SKADDEN, ARPS, SLATE, MEAGHER 222 Delaware Avenue
& FLOM LLP P.O. Box 1266
Four Times Square Wilmington, Delaware 19899
New York, New York 10036-6522 Telephone: (302) 421-6800
Telephone: (212) 735-3000 Fax: (302) 421-6813
Fax: (212) 735-2000
Attorneys for Debtor
-and- Debtor-in-Possession Noma Company
Mark S. Chehi (I.D. No. 2855) Neil B. Glassman (I.D. No. 2087)
Jane M. Leamy (I.D. No. 4113) Charlene D. Davis (I.D. No. 2336)
SKADDEN, ARPS, SLATE, MEAGHER THE BAYARD FIRM
& FLOM LLP 222 Delaware Avenue, Suite 900
One Rodney Square Wilmington, Delaware 19899
Wilmington, Delaware 19899 Telephone: (302) 655-5000
Telephone: (302) 651-3000 Fax: (302)658-6395
Fax: (302) 651-3001
Attorneys for Debtor and
Attorneys for Debtors and Debtor-in-Possession GenTek Inc.
Debtors-in-Possession regarding Noma Company and for Debtors
(excluding Noma Company) and Debtors-in-Possession other than
Noma Company regarding certain matters
Dated: August 28, 2003
Wilmington, Delaware
{PAGE}
DISCLAIMER
THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT IS INCLUDED
HEREIN FOR PURPOSES OF SOLICITING ACCEPTANCES OF THE JOINT PLAN OF
REORGANIZATION UNDER CHAPTER 11, TITLE 11, UNITED STATES CODE OF GENTEK INC.,
ET AL., AND NOMA COMPANY, DEBTORS (THE "PLAN"). THE INFORMATION MAY NOT BE
RELIED UPON FOR ANY PURPOSE OTHER THAN TO DETERMINE HOW TO VOTE ON THE PLAN.
NO PERSON MAY GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS, OTHER THAN THE
INFORMATION AND REPRESENTATIONS CONTAINED IN THIS DISCLOSURE STATEMENT,
REGARDING THE PLAN OR THE SOLICITATION OF ACCEPTANCES OF THE PLAN.
ALL CREDITORS ARE ADVISED AND ENCOURAGED TO READ THIS DISCLOSURE
STATEMENT AND THE PLAN IN THEIR ENTIRETY BEFORE VOTING TO ACCEPT OR REJECT THE
PLAN. PLAN SUMMARIES AND STATEMENTS MADE IN THIS DISCLOSURE STATEMENT ARE
QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE PLAN AND THE EXHIBITS AND
SCHEDULES ANNEXED TO THE PLAN. THE STATEMENTS CONTAINED IN THIS DISCLOSURE
STATEMENT ARE MADE ONLY AS OF THE DATE HEREOF, AND THERE CAN BE NO ASSURANCE
THAT THE STATEMENTS CONTAINED HEREIN SHALL BE CORRECT AT ANY TIME AFTER THE
DATE HEREOF.
THIS DISCLOSURE STATEMENT HAS BEEN PREPARED IN ACCORDANCE WITH
SECTION 1125 OF THE UNITED STATES BANKRUPTCY CODE AND RULE 3016 OF THE FEDERAL
RULES OF BANKRUPTCY PROCEDURE AND NOT NECESSARILY IN ACCORDANCE WITH FEDERAL
OR STATE SECURITIES LAWS OR OTHER NON-BANKRUPTCY LAW. THIS DISCLOSURE
STATEMENT HAS BEEN NEITHER APPROVED NOR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE "SEC"), NOR HAS THE SEC PASSED UPON THE ACCURACY OR
ADEQUACY OF THE STATEMENTS CONTAINED HEREIN. PERSONS OR ENTITIES TRADING IN OR
OTHERWISE PURCHASING, SELLING OR TRANSFERRING SECURITIES OR CLAIMS OF GENTEK
INC., OR ANY OF THE AFFILIATED DEBTORS AND DEBTORS-IN-POSSESSION IN THESE
CASES SHOULD EVALUATE THIS DISCLOSURE STATEMENT AND THE PLAN IN LIGHT OF THE
PURPOSE FOR WHICH THEY WERE PREPARED.
AS TO CONTESTED MATTERS, ADVERSARY PROCEEDINGS AND OTHER ACTIONS
OR THREATENED ACTIONS, THIS DISCLOSURE STATEMENT SHALL NOT CONSTITUTE OR BE
CONSTRUED AS AN ADMISSION OF ANY FACT OR LIABILITY, STIPULATION OR WAIVER, BUT
RATHER AS A STATEMENT MADE IN SETTLEMENT NEGOTIATIONS. THIS DISCLOSURE
STATEMENT SHALL NOT BE ADMISSIBLE IN ANY NON-BANKRUPTCY PROCEEDING NOR SHALL
IT BE CONSTRUED TO BE CONCLUSIVE ADVICE ON THE TAX, SECURITIES OR OTHER LEGAL
EFFECTS OF THE PLAN AS TO HOLDERS OF CLAIMS AGAINST OR EQUITY INTERESTS IN
GENTEK INC., OR ANY OF THE AFFILIATED DEBTORS AND DEBTORS-IN-POSSESSION IN
THESE CASES.
{PAGE}
{TABLE}
{CAPTION}
TABLE OF CONTENTS
Page
{S} {C}
I. INTRODUCTION..................................................................................1
II. OVERVIEW OF THE PLAN..........................................................................2
A. General Structure of the Plan.............................................................3
B. Summary of Treatment of Claims and Interests under the Plan...............................5
III. PLAN VOTING INSTRUCTIONS AND PROCEDURES..................................................17
A. Notice to Holders of Claims and Interests................................................17
B. Voting Rights............................................................................17
C. Solicitation Materials...................................................................18
D. Voting Procedures, Ballots and Voting Deadline...........................................18
E. Special Notice Concerning Voting.........................................................19
F. Confirmation Hearing and Deadline for Objections to Confirmation.........................20
IV. GENERAL INFORMATION CONCERNING THE DEBTORS...................................................20
A. Overview of Business Operations..........................................................20
B. Organizational Structure.................................................................21
C. Business Operations......................................................................21
D. Management and Employees.................................................................29
E. Capital Structure of the Company.........................................................35
F. Summary of Assets........................................................................38
G. Historical Financial Information.........................................................39
H. Events Leading to Commencement of the Chapter 11 Case....................................39
V. CHAPTER 11 CASE..............................................................................40
A. Continuation of Business; Stay of Litigation.............................................40
B. First Day Orders.........................................................................40
C. Recognition of the Chapter 11 Case in Canada.............................................41
D. Retention of Professionals...............................................................41
E. Official Appointment of Creditors Committee..............................................41
F. Authorization to Use Cash Collateral.....................................................42
G. Postpetition and Postconfirmation Funding................................................42
H. Other Material Matters Addressed During the Chapter 11 Case..............................43
I. Plan Process.............................................................................48
VI. SUMMARY OF THE PLAN OF REORGANIZATION........................................................49
A. Overall Structure of the Plan............................................................49
B. Substantive Consolidation................................................................50
C. Compromise and Settlement................................................................52
D. Reorganized Capital Structure Created by Plan............................................54
E. Classification and Treatment of Claims and Interests.....................................55
F. Reservation of Rights Regarding Claims...................................................73
G. Restructuring Transactions...............................................................73
H. Allowed Claims, Distribution Rights and Objections to Claims.............................76
I. Disposition of Executory Contracts and Unexpired Leases..................................79
J. Revesting of Assets; Release of Liens; Effective Date Restructurings.....................81
K. Post-Consummation Corporate Structure, Management and Operation..........................82
L. Confirmation and/or Consummation.........................................................84
M. Releases, Discharge, Injunctions, Exculpation and Indemnification........................86
N. Preservation of Rights of Action.........................................................89
O. Pursuit of Preference Rights.............................................................90
P. Retention of Jurisdiction................................................................91
Q. Amendment, Alteration and Revocation of Plan.............................................93
R. Plan Implementing Documents..............................................................93
VII. CERTAIN RISK FACTORS TO BE CONSIDERED....................................................94
A. General Considerations...................................................................94
B. Certain Bankruptcy Considerations........................................................94
C. Claims Estimations.......................................................................95
D. Conditions Precedent to Consummation.....................................................95
E. Inherent Uncertainty of Financial Projections............................................95
F. Certain Risk Factors Relating to Securities to be Issued Under the Plan..................95
G. Competition..............................................................................97
H. Raw Materials / Production...............................................................97
I. Market Conditions........................................................................98
J. Cyclicality..............................................................................98
K. Environmental............................................................................98
L. Reliance on Key Personnel................................................................99
M. Latona Transition.......................................................................100
N. Preference Rights.......................................................................100
O. Unfunded Pension Liability and Asset Rate of Return.....................................100
P. Risks Related to Foreign Operations.....................................................101
Q. Leverage................................................................................101
R. Litigation..............................................................................102
S. Adverse Publicity.......................................................................102
T. Certain Tax Considerations..............................................................102
VIII. APPLICABILITY OF FEDERAL AND OTHER SECURITIES LAWS......................................102
A. Offer and Sale of New Securities Pursuant to the Plan: Bankruptcy Code Exemption
from Registration Requirements..........................................................102
B. Subsequent Transfers of New Securities..................................................102
IX. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN.........................................104
A. Certain U.S. Federal Income Tax Consequences of the Plan................................104
B. Certain Canadian Federal Income Tax Consequences of the Plan to Noma Company
and Canadian Holders of Claims..........................................................111
X. FEASIBILITY OF THE PLAN AND BEST INTERESTS OF CREDITORS.....................................113
A. Feasibility of the Plan.................................................................113
B. Acceptance of the Plan..................................................................114
C. Best Interests Test.....................................................................114
D. Liquidation Analysis....................................................................115
E. Valuation of the Reorganized Debtors....................................................115
F. Application of the "Best Interests" of Creditors Test to the Liquidation Analysis
and the Valuation.......................................................................116
G. Confirmation Without Acceptance of All Impaired Classes: The "Cramdown" Alternative.....116
XI. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN...................................117
A. Alternative Plan(s) of Reorganization...................................................117
B. Liquidation under Chapter 7 or Chapter 11...............................................117
XII. THE SOLICITATION; VOTING PROCEDURES.....................................................118
A. Parties in Interest Entitled to Vote....................................................118
B. Classes Entitled to Vote to Accept or Reject the Plan...................................118
C. Solicitation Order......................................................................118
D. Waivers of Defects, Irregularities, Etc.................................................118
E. Withdrawal of Ballots; Revocation.......................................................119
F. Special Instructions for holders of Bondholder Unsecured Claims.........................119
G. Voting Rights of Disputed Claimants.....................................................119
H. Further Information; Additional Copies..................................................120
RECOMMENDATION AND CONCLUSION...................................................................121
{/TABLE}
{PAGE}
TABLE OF APPENDICES
Appendix A Joint Plan of Reorganization Under Chapter 11, Title 11, United
States Code of GenTek Inc., et al., and Noma Company, Debtors
Appendix B Pro Forma Financial Projections
Appendix C Corporate Structure Chart
Appendix D Historical Financial Information
Appendix E Liquidation Analysis
Appendix F Post-Effective Date Corporate Structure Chart
{PAGE}
DISCLOSURE STATEMENT WITH RESPECT TO
JOINT PLAN OF REORGANIZATION UNDER CHAPTER 11, TITLE 11,
UNITED STATES CODE OF GENTEK INC., ET AL., AND NOMA COMPANY, DEBTORS
I. INTRODUCTION
The debtors and debtors-in-possession in the above-referenced
Chapter 11 Case include the following related companies (collectively, the
"Debtors"):
{TABLE}
{S} {C}
GenTek Inc. Krone Digital Communications Inc.
Balcrank Products, Inc. Krone Incorporated
Big T-2 Company LLC Krone International Holding Inc.
Binderline Draftline, Inc. Krone Optical Systems Inc.
Con-X Corporation Krone USA, Incorporated
Defiance, Inc. Noma Company
Defiance Kinematics Inc. Noma Corporation
Defiance Precision Products, Inc. Noma O.P., Inc.
Defiance Precision Products Management LLC PCT Mexico Corporation
Defiance Precision Products Manufacturing LLC Printing Development, Inc.
Defiance Testing and Engineering Services, Inc. Reheis, Inc.
Electronic Interconnect Systems, Inc. Toledo Technologies Inc.
Fini Enterprises, Inc. Toledo Technologies Management LLC
General Chemical Corporation Toledo Technologies Manufacturing LLC
HN Investment Holdings Inc. Vigilant Networks LLC
Hy-Form Products, Inc. Waterside Urban Renewal Corporation
{/TABLE}
The Debtors submit this disclosure statement (this "Disclosure
Statement") pursuant to Section 1125 of Title 11 of the United States Code
(the "Bankruptcy Code"), for use in the solicitation of votes on the Joint
Plan of Reorganization Under Chapter 11, Title 11, United States Code of
GenTek Inc. ("GenTek"), et al. and Noma Company, Debtors, dated August 28,
2003 (the "Plan"). A copy of the Plan is attached as Appendix A to this
Disclosure Statement. All capitalized terms used in this Disclosure Statement
but not otherwise defined herein have the meanings ascribed to such terms in
the Plan. In addition, all references in this Disclosure Statement to monetary
figures refer to United States currency, unless otherwise expressly provided.
This Disclosure Statement sets forth certain information regarding
the Debtors' prepetition operating and financial history, their reasons for
seeking protection and reorganization under Chapter 11, significant events
that have occurred during the Chapter 11 Case and the anticipated
organization, operations and financing of the Debtors upon successful
emergence from Chapter 11. This Disclosure Statement also describes certain
terms and provisions of the Plan, certain effects of confirmation of the Plan,
certain risk factors associated with the Plan and the securities to be issued
under the Plan, and the manner in which distributions will be made under the
Plan. In addition, this Disclosure Statement discusses the confirmation
process and the voting procedures that holders of Claims entitled to vote
under the Plan must follow for their votes to be counted.
By order dated August 27, 2003, the Bankruptcy Court has approved
this Disclosure Statement as containing "adequate information" in accordance
with Section 1125 of the Bankruptcy Code, to enable a hypothetical, reasonable
investor typical of holders of Claims against, or Interests in, the Debtors to
make an informed judgment as to whether to accept or reject the Plan; and has
authorized its use in connection with the solicitation of votes with respect
to the Plan. APPROVAL OF THIS DISCLOSURE STATEMENT DOES NOT, HOWEVER,
CONSTITUTE A DETERMINATION BY THE BANKRUPTCY COURT AS TO THE FAIRNESS OR
MERITS OF THE PLAN. No solicitation of votes may be made except pursuant to
this Disclosure Statement or the summary of the Disclosure Statement and
Section 1125 of the Bankruptcy Code. In voting on the Plan, holders of Claims
entitled to vote should not rely on any information relating to the Debtors
and their businesses, other than that contained in this Disclosure Statement
or the summary of the Disclosure Statement, the Plan and all exhibits hereto
and thereto.
Pursuant to the provisions of the Bankruptcy Code, only classes of
claims or interests that are (i) "impaired" by a plan of reorganization and
(ii) entitled to receive a distribution under such plan are entitled to vote
on the plan. In the Debtors' cases, only Claims in Classes 4, 5, 6, 7, 8, 9,
10 and 11 are impaired by and entitled to receive a distribution under the
Plan, and only the holders of Claims in those Classes are entitled to vote to
accept or reject the Plan. Claims in Classes 1, 2 and 3 are unimpaired by the
Plan, and the holders thereof are conclusively presumed to have accepted the
Plan. Claims or Interests in Classes 12, 13, 14, 15 and 16, which receive
nothing under the Plan, are deemed to have rejected the Plan and the holders
of Claims or Interests in each of such Classes are not entitled to vote.
FOR A DESCRIPTION OF THE PLAN AND VARIOUS RISKS AND OTHER FACTORS
PERTAINING TO THE PLAN, PLEASE SEE ARTICLE VI OF THIS DISCLOSURE STATEMENT,
ENTITLED "SUMMARY OF THE PLAN OF REORGANIZATION," AND ARTICLE VII OF THIS
DISCLOSURE STATEMENT, ENTITLED "CERTAIN RISK FACTORS TO BE CONSIDERED."
THIS DISCLOSURE STATEMENT CONTAINS SUMMARIES OF CERTAIN PROVISIONS
OF THE PLAN, CERTAIN STATUTORY PROVISIONS, CERTAIN DOCUMENTS RELATING TO THE
PLAN, CERTAIN EVENTS THAT HAVE OCCURRED IN THE CHAPTER 11 CASE AND CERTAIN
FINANCIAL INFORMATION. ALTHOUGH THE DEBTORS BELIEVE THAT THE SUMMARIES OF THE
PLAN AND RELATED DOCUMENT SUMMARIES ARE FAIR AND ACCURATE AS OF THE DATE HEREOF,
SUCH SUMMARIES ARE QUALIFIED TO THE EXTENT THAT THEY DO NOT SET FORTH THE ENTIRE
TEXT OF SUCH DOCUMENTS OR STATUTORY PROVISIONS AND TO THE EXTENT THEY MAY CHANGE
AS PERMITTED BY THE PLAN AND APPLICABLE LAW. FACTUAL INFORMATION CONTAINED IN
THIS DISCLOSURE STATEMENT HAS BEEN PROVIDED BY THE DEBTORS' MANAGEMENT, EXCEPT
WHERE OTHERWISE SPECIFICALLY NOTED. THE DEBTORS DO NOT WARRANT OR REPRESENT THAT
THE INFORMATION CONTAINED HEREIN, INCLUDING THE FINANCIAL INFORMATION, IS
WITHOUT ANY MATERIAL INACCURACY OR OMISSION.
NOTHING CONTAINED HEREIN SHALL BE DEEMED TO CONSTITUTE AN ADMISSION
OF ANY FACT OR LIABILITY BY ANY PARTY, BE ADMISSIBLE IN ANY NON-BANKRUPTCY
PROCEEDING INVOLVING THE DEBTORS OR ANY OTHER PARTY, OR BE DEEMED CONCLUSIVE
ADVICE ON THE TAX OR OTHER LEGAL EFFECTS OF THE REORGANIZATION AS TO HOLDERS OF
ALLOWED CLAIMS OR INTERESTS. YOU SHOULD CONSULT YOUR PERSONAL COUNSEL OR TAX
ADVISOR ON ANY QUESTIONS OR CONCERNS RESPECTING TAX, SECURITIES, OR OTHER LEGAL
CONSEQUENCES OF THE PLAN.
CERTAIN OF THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT IS
BY ITS NATURE FORWARD LOOKING AND CONTAINS ESTIMATES, ASSUMPTIONS AND
PROJECTIONS THAT MAY BE MATERIALLY DIFFERENT FROM ACTUAL, FUTURE RESULTS. Except
with respect to the pro forma financial projections set forth in Appendix B
annexed hereto (the "Projections") and except as otherwise specifically and
expressly stated herein, this Disclosure Statement does not reflect any events
that may occur subsequent to the date hereof and that may have a material impact
on the information contained in this Disclosure Statement. The Debtors do not
undertake any obligation to, and do not intend to, update the Projections; thus,
the Projections will not reflect the impact of any subsequent events not already
accounted for in the assumptions underlying the Projections. Further, the
Debtors do not anticipate that any amendments or supplements to this Disclosure
Statement will be distributed to reflect such occurrences. Accordingly, the
delivery of this Disclosure Statement will not under any circumstance imply that
the information herein is correct or complete as of any time subsequent to the
date hereof. Moreover, the Projections are based on assumptions that, although
believed to be reasonable by the Debtors, may differ from actual results.
THE DEBTORS BELIEVE THAT THE PLAN WILL ENABLE THE DEBTORS TO
SUCCESSFULLY REORGANIZE AND ACCOMPLISH THE OBJECTIVES OF CHAPTER 11 AND THAT
ACCEPTANCE OF THE PLAN IS IN THE BEST INTERESTS OF THE DEBTORS AND THE HOLDERS
OF CLAIMS IN CLASSES 4, 5, 6, 7, 8, 9, 10 AND 11. THE DEBTORS URGE SUCH HOLDERS
TO VOTE TO ACCEPT THE PLAN.
II. OVERVIEW OF THE PLAN
The following is a brief overview of the material provisions of the
Plan and is qualified in its entirety by reference to the full text of the Plan.
For a more detailed description of the terms and provisions of the Plan, see
Article VI of this Disclosure Statement, entitled "Summary of the Plan of
Reorganization."
The Plan provides for the classification and treatment of Claims
against and Interests in the Debtors, based upon a joint plan structure
supported by substantive consolidation and compromise principles. The Plan
designates 14 Classes of Claims and 2 Classes of Interests. These Classes take
into account the differing nature and priority under the Bankruptcy Code of the
various Claims and Interests.
The Plan represents an agreement as to the terms of a consensual
reorganization under Chapter 11, reached among the Debtors, the official
committee of unsecured creditors appointed pursuant to Section 1102(a) of the
Bankruptcy Code in the Chapter 11 Case (the "Creditors Committee") and the
secured lenders (the "Existing Lenders") under that certain credit agreement
dated as of April 30, 1999, as amended and restated as of August 9, 2000 and as
of August 1, 2001 (the "Existing Credit Agreement").
The Debtors believe that the Plan presents the best means currently
available for their emergence from Chapter 11.
A. General Structure of the Plan
The Plan is structured as a joint plan, pursuant to substantive
consolidation or compromise. The terms of the Plan are the product of an
agreement reached among the Debtors, the Existing Lenders and the Creditors
Committee, as previously mentioned. Claims are treated generally in accordance
with the priorities established under the Bankruptcy Code, although given the
nature and amount of Secured Claims and the value of the Debtors' assets, the
treatment afforded to holders of unsecured Claims, who would not otherwise be
entitled to any recovery from the Debtors, results from the willingness of the
Existing Lenders as holders of Secured Claims to give up a portion of their
recovery. The Existing Lenders have an Allowed Claim in the amount of $756
million (including the Tranche B Lender Deficiency Claim and the Tranche B
Lender Secured Claim). As discussed in more detail below, the enterprise value
of Reorganized GenTek (including Noma Company) on a going concern basis is
assumed to be between $500.0 million and $600.0 million, with a midpoint of
$550.0 million. Accordingly, the Existing Lenders are undersecured and the
Existing Lenders' Claims will not be paid in full. Distributions to the Existing
Lenders, which will consist of Cash and New Securities, will have a value that
roughly approximates, but the Debtors believe to be less than, the value of the
collateral that secures their Claims. The unsecured deficiency Claims of the
Existing Lenders are receiving no recovery. Nevertheless, the Plan proposes that
holders of unsecured Claims will share in the new equity to be distributed under
the Plan, in the form of New GenTek Common Stock and New GenTek Warrants, or in
certain cases, will be entitled to elect to share in a distribution of Cash.
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