EnviroSolutions Holdings Inc., a trash hauler and owner of three landfills, has an approved reorganization plan given a confirmation order signed by the bankruptcy judge on July 22. The judge imposed a so-called cramdown on general unsecured creditors with $9.6 million in claims who voted against the plan.
First-lien creditors are receiving almost all of the new stock plus an $85 million secured term loan in return for a $198 million term loan. The disclosure statement explaining the plan projected a 77.8 percent recovery on the existing term loan.
Second-lien lenders, owed $23.3 million, are receiving $1.4 million cash. Some of them objected to the plan.
The unsecured creditors’ committee believed the company is worth more than the first-lien debt. The class voted against the plan. The judge confirmed the plan over their objection and “no” vote because he found that the reorganization gives them more than they would receive through liquidation. The procedure is known as cramdown.
The plan gives unsecured creditors about 10 percent in cash.
Although the second-lien creditors might have received nothing because the company was not worth enough to cover the first-lien debt, U.S. Bankruptcy Judge Stuart M. Bernstein concluded that the plan didn’t discriminate against general unsecured creditors. Bernstein determined that the recovery on the second lien was “gift” from the first-lien creditors.
Northwestern Mutual Life Insurance Co., the holder of $41.7 million in subordinated notes, received warrants for 5 percent of the stock.
The plan was negotiated with holders of 74.8 percent of the first-lien debt.
Based in Manassas, Virginia, EnviroSolutions had a $29.3 million net loss in 2009 on revenue of $134 million. It operates in the mid-Atlantic states and the Northeast.
The case is In re EnviroSolutions of New York LLC, 10- 11236, U.S. Bankruptcy Court, Southern District New York (Manhattan).Download as PDF