Building Materials Holding Corp. (BMHC) announced today that a group of lenders led by Wells Fargo has committed at least $83.5 million and possibly $103.5 million in financing that would enable America's sixth-biggest LBM operation to emerge later this year from Chapter 11 bankruptcy-law protection from creditors.
BMHC also filed an amended reorganization plan with the U.S. Bankruptcy Court in Wilmington, Del., where BMHC filed for Chapter 11 on June 16. "The amended plan, which is subject to court approval, provides for BMHC's secured lenders to convert debt into equity, becoming majority owners of the company upon emergence," BMHC's announcement said. Current shares will be extinguished and thus current shareholders have lost all their investments.
The news came a day after Boise, Idaho-based BMHC reported to the same bankruptcy court that its net loss deepened by nearly 70% in August from the month before to reach $15.9 million even though sales dipped just 3% to $64.3 million. (Story.)
"We are very pleased to have obtained a commitment for exit financing, which is an important step in preparing the company for emergence and keeps us on track to complete our balance sheet restructuring before year-end," said Robert E. Mellor, BMHC's chairman and CEO. "The restructuring will reduce our debt substantially and provide us with greaterfinancial flexibility, putting our company in a stronger position for the future."
The exit financing agreement is worth $83.5 million and contains an option to expand the facility by $20 million, pushing its total to $103.5 million. Of that total, $30 million to $50 million is in the form of a credit revolver, while another $53.5 million will be in the form of a term loan. Outstanding amounts on the loans will be due on the third anniversary of their effective date.
BMHC will ask the bankruptcy court to approve its Amended Disclosure Statement during a hearing on Oct. 7. It envisions creditors voting on the reorganization plan on Nov. 12 and a bankruptcy judge hearing the results on Nov. 19.
The reorganized BMHC would be a private company 100% owned by the holders of lender claims that had been created before BMHC went into Chapter 11. BMHC anticipates that, under its reorganization plan, these prepetition lenders (principally Wells Fargo) would recover 72.4% of what they put into BMHC, while general unsecured claimants would get back only 13.1%--and that would occur only if they approved the reorganization agreement; otherwise, the could get nothing.
BMHC anticipates that upon emergence from Chapter 11, it would have $129 million in net debt--basically $189 million in total debt less $59 million in balance sheet cash. By December 2012, it epxects its debt to have shrunk to $53 million, basically because its total debt would hold steady (reaching $195 million) while cash on the balance sheet would swell to $142 million.
BMHC ranked sixth on this year's ProSales 100, with total sales in 2008 of $1.3 billion, all of it to professionals. According to a bankruptcy court filing, it incurred a loss of $192.5 million that year. It has shrunk from 22,824 employees as of June 2006 to about 5,000 workers on June 16 of this year, and in recent years it has sold, closed, or consolidated 78 branches.