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Hayes Creditors Reach Compromise

12 Apr 2003

Creditors to Hayes Lemmerz International reached a compromise that will allow the company to go forward with its reorganization. Bank debt holders wanting more value coming out of bankruptcy did not consent to the company's previous plan of reorganization, leading senior noteholders to threaten litigation, and sending creditors back to the table (LMW, 4/7). The bank debt traded in the 82-83 1/2 context after the new plan was announced up from the 80 1/2-81 range where it was moving two weeks ago.

While the bank debt holders were able to eke out a little more value, noteholders did not feel that the amount was enough to pursue litigation. The new plan is a compromise agreement that will allow Hayes to emerge efficiently from bankruptcy and concentrate on its business, which means more to senior noteholders, commented one senior noteholder.

The senior lenders, who have claims of roughly $790 million, would receive $450 million in cash under the previous plan of reorganization and about 50.1% of the shares in the reorganized company. According to the terms of the new plan, senior lenders will receive $453.5 million in cash, $25 million in new senior notes and 53.1% of the new common stock. Investors holding $316 million in senior note claims will now receive $13 million in cash and 44.9% of the new common stock, compared to their recovery package under the old deal, which would have provided $13 million in cash and 47.9% of the shares in the reorganized company.

Last Wednesday, the company received more than 85% approval from its secured lenders for the new plan. The deadline for Hayes' remaining creditors to vote on the modified plan is now May 2. A confirmation hearing is set for May 7. "We're pleased that our creditors reached a quick, equitable resolution of their issues. We look forward to completing our final phase," said a company spokeswoman.


12 Apr 2003