Masonite Seeks Approval for Restructuring Plan
Masonite International Inc. has reached an agreement with a group of creditors on restructuring plans that will enable the company to significantly reduce its outstanding debt. The deal, which the door maker hopes will be approved by other lenders, will enable Masonite to reduce its total funded debt by nearly $2 billion, from $2.2 billion today to up to $300 million, according to officials.
The plan would reduce annual cash interest costs by approximately $145 million and provide Masonite with greater liquidity and financial flexibility as it continues to take aggressive action to address challenges created by the downturn in the global housing and credit markets, executives note.
"We are very pleased to have reached an agreement in principle on a plan that will allow us to reduce our debt substantially and put Masonite in a stronger, financially healthier position for the future," said Fred Lynch, Masonite president and CEO. "With an appropriately sized capital structure and greater financial flexibility, along with our excellent market position, strong brand, and industry-leading products, we believe we will be well-positioned to take advantage of market opportunities and grow our business over the long term."
It is anticipated that the restructuring would be implemented by means of a "pre-negotiated" plan of reorganization filed in conjunction with voluntary Chapter 11 proceedings in the United States and similar proceedings under the Companies' Creditors Arrangement Act in Canada. These legal proceedings would be initiated upon receipt of approvals for the restructuring plan from the requisite percentages of the lender and bondholder constituencies. Pre-negotiated restructuring plans typically require only 90 to 120 days to effectuate. The implementation of the agreement in principle is subject to closing conditions.
Masonite officials state that the door manufacturer fully expects to continue to operate in the normal course of business during the restructuring process. All of its manufacturing and distribution facilities around the world will remain open and continue to serve customers in the normal course. Masonite's subsidiaries and affiliates outside of North America are not expected to be adversely impacted by the legal proceedings.
The proposed restructuring plan further provides for all trade creditors to be "unimpaired," which means that trade suppliers and vendors would be paid in full under the plan, it is reported. To this end, Masonite intends to seek authorization from U.S. and Canadian courts to continue to pay trade creditors under normal terms in the ordinary course of business, it is noted.