J.P. Morgan and a group of distressed investors have taken over Bush Industries following the furniture company's bankruptcy exit and the conversion of pre-petition bank debt into 100% equity ownership. DDJ Capital Management and Silver Point Capital are among the funds that alongside J.P Morgan are now betting on improved fortunes for the Jamestown, N.Y.-based company.
"We had been following the company for a while and had some suggestions in regards to the restructuring once we got involved," said John Ehlinger, v.p. of DDJ Capital Management and a Bush board member. "There are a lot of challenges in the industry as a whole and we hope to get back par. We hope that we can weather the storm and make the right decisions."
DDJ, which owns approximately one third of the company, and the other distressed players began buying the company's $160 million of bank debt at the beginning of this year. The buying continued up until the bankruptcy filing in March, when holders of 85% of the debt entered into a lock-up and voting agreement. At that time Bush was unable to obtain additional financing or meet covenants on the bank debt, which was set to mature in June 2004.
"We have primarily conducted a balance sheet adjustment with some operational alterations," said Michael Buenzow, a senior managing director of FTI Consulting and interim ceo of Bush. The reorganization saw $90 million of this bank debt converted into equity. The remaining $70 million has been refinanced through 2006 with a $50 million term note priced at the prime rate plus 4% and a $20 million revolver at prime plus 2%.
J.P. Morgan, the only remaining lender from the initial loan group, has been the agent and lead bank since 1997. "J.P. Morgan Chase was the lone holdover from the original loan group. Everyone else bought into the company from former borrowers," noted Buenzow. The original syndicate comprised Citizens Bank of Pennsylvania, Fleet Bank, HSBC Bank, National Bank of Pennsylvania, PNC Bank and Wachovia Bank. Michael Gatto, a principal at SilverPoint and a Bush board member, was traveling and could not be reached.
The shareholders, meanwhile, have been compensated for their cancelled stock through a cash distribution of $1.6 million. "To get out of Chapter 11 we had to cut a deal with them," noted Buenzow. Initially, DDJ and the other bank debt holders were offering nothing to the equity holders, said Lawrence Gottlieb, an attorney with Kronish Lieb Weiner & Hellman, who represented the equity committee. Late in the process an alternative plan was proposed with Bayside Capital Opportunity Fund, Mellon HBV Alternative Strategies and Galloway Capital Management. This plan was not encouraged, Gottlieb added. He said the principal argument though was over how the equity holders valued the company. "The judge was fair, but we thought the equity value was higher than the judge ruled."
