Building Materials Holding Corp. (BMHC), the nation's sixth-biggest LBM dealer, asked a federal bankruptcy judge on Monday to extend by three months its exclusive rights to offer a reorganization plan and solicit approval for that plan to exit from Chapter 11 bankruptcy-law protection.
BMHC's filing stressed that the Boise, Idaho-based company still plans to emerge from under the Chapter 11 umbrella by year-end. "Nonetheless, the Debtors are filing this motion out of an abundance of caution because they believe that potential issues caused by competing plans at this stage would distract management and would not be productive," the company's request said. "Thus, preserving the Exclusive Periods is in the best interests of the Debtors and their estates."
BMHC filed for Chapter 11 bankruptcy on June 16, victim of a housing downturn that was especially vicious to the production builders catered to by BMHC's SelectBuild turnkey framing division. (The other half of the company, the BMC West dealerships, also has suffered, but not quite as much.) BMHC was the No. 6 dealer on this year's ProSales 100, with total sales in 2008 of $1.3 billion. But in the 12-month period ended Aug. 31, BMHC's revenue had shrunk to $842 million, its assets were worth $406 million and its liabilities totaled $459 million.
Companies that seek Chapter 11 protection from creditors enjoy, for the first 120 days after entering bankruptcy, the exclusive right to file a reorganization plan. They also enjoy exclusive rights during the first 180 days after filing to solicit approval for that plan. After that, other groups--most likely creditors and would-be owners--can file their own proposals. In BMHC's case, its exclusive period for filing a reorganization plan ends Oct. 14 and its exclusive right to solicit ends Dec. 14.
One key document required for getting out of Chapter 11 is a disclosure statement in which a company indicates its condition and its plans for a proposed financial reorganization. BMHC issued a disclosure statement on June 16, amended it on July 27, and then amended it again on Oct. 1. It had hoped U.S. Bankruptcy Judge Kevin Carey would approve that disclosure statement during an Oct. 7 hearing, but creditors requested Carey delay a decision until Nov. 19. Carey instead essentially split the difference and said he would consider motions on the disclosure statement on Oct. 22. (Story.)
Some of the creditors' concern might be because BMHC's amended reorganization plan provides for BMHC's secured lenders to convert debt into equity, becoming majority owners of the company upon emergence. Current shares will be extinguished and thus current shareholders have lost all their investments. BMHC anticipates that, under its reorganization plan, the 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, they could get nothing.
"An extension of the Exclusive Periods will permit the Debtors and their creditors to make additional progress towards confirmation of the plan," BMHC's filing said. "The Debtors have endeavored, through regular interaction with their primary creditor constituencies, to establish and maintain a cooperative working relationship. ... There is a legitimate risk that a denial of the Motion would signal a loss of confidence in the Debtors and their reorganization efforts, which would harm the Debtors and their creditors."