Judge Confirms Congoleum's Reorganization
Steven Feldman, FloorBiz.com - After more than six years, a district court has approved Congoleum's reorganization plan, paving the way for the company to emerge from bankruptcy. In the order signed June 7, Judge Joel Pisano of the U.S. District Court in New Jersey stated the plan was supported by more than 95% of asbestos personal injury claimants.
Now that the plan has the court's approval, Roger Marcus, president and CEO, said Congoleum will move to implement the initiative. "That includes things we have already put in motion but couldn't complete until the judge ruled favorably on our plan, like finalizing new financing arrangements with the bank. We already have the bank's approval, but there is a lot of paperwork. We expect to complete these remaining steps and emerge from bankruptcy shortly."
Ownership of the company will be transferred to bondholders and current and future asbestos litigation plaintiffs. Under the plan, the company will give 50.1% of the stock in the reorganized Congoleum to a trust set up for the benefit of holders of asbestos personal injury claims. The trust will get approximately $235 million from court-approved asbestos insurance settlement agreements. It will also get rights to additional asbestos coverage not the subject of any settlement. The remaining stock will go to holders of senior note claims.
And the reorganized Congoleum will issue $33 million in new notes to bondholders. "I am absolutely elated to see Congoleum's plan confirmed at last," said Marcus, who remains CEO for a minimum of two years and maintains one of five board of director positions. "It has been a long, difficult journey out of the complicated asbestos and insurance litigation we faced nearly nine years ago. I could not be happier about putting this chapter of our history behind us."
Ronald Reinsel, an attorney representing the committee of asbestos claimants in Congoleum's bankruptcy case, expressed similar relief. "It was a long and hard fought case and we're glad to finally get it resolved."
Congoleum sought Chapter 11 protection Dec. 31, 2003, in Trenton, N.J., to deal with the thousands of lawsuits brought by people seeking compensation for illnesses they claim they suffered as a result of exposure to Congoleum's asbestos-laden floor tiles. The company initially believed it would emerge within months. But the landscape of asbestos prepackaged bankruptcies changed within the U.S. court system, and Congoleum was caught in the middle.
During Congoleum's bankruptcy case, crafting a plan to deal with the asbestos-related claims, its debt and other legal issues was no easy feat. The manufacturer failed to win court approval of more than a dozen debt-repayment plans, was embroiled in litigation with insurers for failing to provide coverage on asbestos claims, and had to defend its stay in bankruptcy. But in March, the company was finally able to file a plan that could be supported by asbestos personal injury claimants and secure court approval.
Business as usual
Marcus told FCNews in an exclusive interview there will be no noticeable difference in the way Congoleum conducts business in the post-bankruptcy era. "The bankruptcy had no bearing on any major or even medium decision we made over the past six-plus years. Everything we did was because we thought it was judicious for the company. Everything we haven't done has been economically driven and not due to bankruptcy."
In illustration, Marcus recalled Congoleum's many successful introductions in the last nine months: AirStep Evolution, Ovations, Connections and "we're 30 days away from making another huge splash in the market with something as important as the other three."
If anything, this removes a distraction that has been in place for quite some time. "Aside from the fact it may help us in the field—there was the perception of a dark cloud over our head—it was a pounding on our chest. It was a concern. You always believe you will be cured of the disease, but it's a lot better when the doctor finally tells you you're cured."
So what did the last six-plus years teach Marcus? "Some people say nice people finish last. This is shining proof that statement is hooey. Bankruptcy is one thing, but having bankruptcy on top of the difficult economy was a real double-edged sword. To have survived financially, to have survived maintaining our entire customer base, and to have survived without a glitch in supply speak volumes about our people and their relationships. We have gone through a tumultuous period unscathed."
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