Lincolnshire's RathGibson sold to creditors in bankruptcy

The bankruptcy judge signed a confirmation order on May 21 approving the reorganization plan for RathGibson Inc. based on a settlement with creditor groups, court records say.

With all creditor classes voting for the plan, the manufacturer of welded tubing products can prepare to implement the plan where secured creditors with $83.6 million in claims are to be paid in full.

Holders of unsecured notes and other RathGibson unsecured creditors are expected to receive 1.2 percent on their claims, according to the explanatory disclosure statement. Creditors of affiliate Greenville Tube, with $209 million in claims, are to have a 0.2 percent dividend. Greenville Tube guaranteed the notes.

Holders of $152.2 million holding company pay-in-kind notes also can expect a 0.2 percent recovery.

Most of the claims are on account of borrowed money. The disclosure statement says that trade debt amounts to $6.4 million.

The approved plan is based on a sale of the business for $93 million cash to a group including some of the existing secured lenders and holders of 70 percent of the $209.5 million in 11.25 percent unsecured notes. No competing offers were made.

The bankruptcy court approved a disclosure statement last year explaining a previous version of the plan. It was dropped following objection from creditors of affiliates not dealt with in the original reorganization.

The original plan was negotiated with holders of 73 percent of the senior unsecured notes before the Chapter 11 filing in July 2009. The original plan would have paid $6.6 million of unsecured creditors in full while noteholders received 82.5 percent of the new stock. Another 7.5 percent would have gone to the lenders for the reorganization.

The Lincolnshire-based company listed assets of $305 million against debt totaling $319 million. In addition to $209 million in senior notes, debt included $55.3 million on secured credit agreements and $10.4 million owing to trade suppliers. The holding company was also liable on $115 million in pay-in-kind notes. A group including management and an affiliate of DLJ Merchant Banking Partners acquired control of RathGibson in June 2007.

The case is In re RathGibson Inc., 09-12452, U.S. Bankruptcy Court, District of Delaware (Wilmington).