Masonite Initiates Reorganization Plan
Masonite International Inc. says it will voluntarily file for bankruptcy protection from creditors as part of a pre-approved plan to reduce its debt. Having received approval from its bank lenders and bondholders, the door maker will implement the previously announced debt restructuring plan under the Companies' Creditors Arrangement Act in Canada and under Chapter 11 of the U.S. Bankruptcy Code in the United States.
As proposed, the plan is expected to enable Masonite to reduce its outstanding debt by nearly $2 billion, from $2.2 billion today to up to $300 million upon consummation of the plan, and reduce its annual cash interest costs by approximately $145 million.
"We are very pleased to have received strong support from our lender and bondholder groups for our debt restructuring plan," says Fred Lynch, Masonite president and CEO. "We are ahead of schedule and intend to proceed quickly and expeditiously to implement the plan, which would reduce Masonite’s debt by nearly $2 billion and put our company in a stronger, financially healthier position for the future. We expect to emerge from this process with an appropriate capital structure to support our long-term business objectives and with increased financial flexibility both to navigate the current industry challenges and to take advantage of future growth opportunities."
Under the proposed plan, all trade creditors would be "unimpaired," which means that trade suppliers and vendors would be paid in full. To this end, the company has filed motions seeking authorization from the U.S. and Canadian courts to continue to pay trade creditors under normal terms in the ordinary course of business. As of March 12, 2009, Masonite reports it had more than $150 million in cash on hand that will be available to satisfy obligations associated with conducting the door maker's business in the ordinary course.
Masonite plans to continue to operate as usual during the restructuring process, officials note. The company’s manufacturing and distribution facilities around the world will continue to serve customers in the normal course.
Officials point out that Masonite’s subsidiaries and affiliates outside of North America have not initiated reorganization cases and are not expected to be adversely impacted by the legal proceedings.
Kohlberg, Kravis & Roberts, the leveraged buyout firm, is majority owner of Masonite.