Venture Holdings Co.'s pro-rata tranche traded at the 44-46 range, down from the low 50s, after Venture's founder Larry Winget was able to rescind an agreement that would roll nine outside companies he owned into a reorganized Venture. "Venture pro rata paper has been trading lower as [in] the previous plan, Winget was going to contribute some assets that would have enhanced lender recovery," one trader explained.
Judge Thomas Tucker of the U.S. Bankruptcy Court for the Eastern District of Michigan decided Winget could not be forced to contribute these companies, which were a major part of the company's reorganization plan. This plan is now invalid. Tucker stated that specific wording in the contribution agreement allowed Winget to cancel it when the company, creditors and himself, could not agree on terms for an exit financing. The company and creditors argued that Winget's cancellation of the agreement was disingenuous, since he had favored obtaining more exit financing. But Tucker ruled that Winget opposed exit-financing terms mainly due to high fees.
Bank One is the pre-petition administrative agent on the bank debt comprising a $175 million revolver and $260 million in term debt. Bank One and Black Diamond Commercial Finance provide the $75 million debtor-in-possession financing and according to the plan, Black Diamond had offered a $125 million exit financing, comprising a $90 million term loan at Prime plus 6 1/2% and a $35 million revolver. The proposed upfront fee was 3 1/2%, which Winget argued was not on market terms.
Venture filed for bankruptcy in 2003 after its German subsidiary,Peguform GmbH became insolvent. The debtors now have a hearing scheduled Feb. 1 seeking approval to sell substantially all of the assets of the debtors under section 363 of the bankruptcy code.
A Venture spokeswoman did not return calls. The steering committee at the time of the proposed plan comprised Barclays Bank, Highland Capital Management, Apollo Management, Marathon Asset Management and Black Diamond. It could not be determined if all of these funds are still involved.
