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 Chanin Capital Partners acted as financial advisor to the Official Committee of Unsecured Creditors (the 'Committee') of GenTek Inc. ('GenTek'), a diversified manufacturer of communications products, industrial components and performance chemicals.
Starting in 2001, the Company was impacted by a severe and prolonged downturn in the telecommunications market and an overleveraged balance sheet. By year end, GenTek violated certain bank covenants and its auditor expressed doubt about the Company's ability to continue as a going concern.
In January 2002, the Company initiated negotiations with the Bank Group's lending agent. By August 2002, Chanin was retained by the Ad Hoc Committee of Holders of GenTek's 11.00% Notes ('Notes') to facilitate a restructuring solution.
On October 11, 2002, GenTek filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Court for the District of Delaware. Subsequent to the Chapter 11 filing, Chanin was retained by the Company's Official Committee of Unsecured Creditors.
Highlights of the transaction include:
- Secured Creditors receive:
- $60 million in cash
- $250 million Senior Secured Notes due 2008
- 93.8% of the new common stock
- Unsecured Creditors receive:
- 6.2% of the new common stock
- Three tranches of warrants expiring in 3, 5, and 7 years
- Existing equity will be cancelled
- Secured and Unsecured Creditors will share in any future proceeds from the Preference Claim Litigation Trust
- Successes of the transaction:
- The Unsecured Creditors (an out-of-the money class) received an estimated recovery of 10.6% -- an implied 17-fold increase from the lowest trading level of the notes.
- The restructuring allowed the Company to adjust its balance sheet to a more reasonable debt level from $974 million at the time of the Chapter 11 filing to approximately $270 million upon its emergence from Chapter 11.
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