Industrial and Manufacturing Bankruptcy Enterprise …2a746fa1-b692-4bda-af51... · Case Studies in...

January 2016

Industrial and Manufacturing Bankruptcy Enterprise Value and Creditor Recoveries Fitch Case Studies — Edition IX

Leveraged Finance

www.fitchratings.com January 28, 2016

Corporates / U.S.A.

Case Studies in Industrial and Manufacturing Bankruptcy Enterprise Value and Creditor Recoveries Special Report

Relatively High Valuation Multiples: There was a 6.3x median multiple of reorganization enterprise value/forward EBITDA for the Industrial and Manufacturing (I&M) sector cases analyzed in this edition of the bankruptcy case study series. The I&M sector median is modestly higher than the 6.0x cross-corporate sector exit multiple in Fitch Ratings’ U.S. bankruptcy case study database. Of the I&M sample, 39% reorganized at a multiple above 7x.

Outstanding First-Lien Recoveries: The average ultimate recovery rate on the 41 first-lien issues of the I&M defaulters was 82% of par value. Of the first-lien debt claims, 68% received distributions of 91% or more of par value, which is equivalent to Fitch’s highest, RR1 category. Many of the first-lien issues with less robust recoveries had a first-lien security interest limited to non-working capital assets and had a second-lien interest on inventory and receivables.

Material Debt Reduction Achieved: The I&M cases analyzed achieved average balance sheet debt reduction of 62% from the bankruptcy date to the emergence date, which was slightly below the 68% cross-sector average, but consistent with higher sector exit multiples. The median debt/forward EBITDA was 3.8x at emergence, compared with an unsustainable level of 12.2x as of filing, using EBITDA for the year prior to filing (medians exclude companies with negative EBITDA and those that lacked disclosure of forecasted or historical EBITDA).

Few Liquidations: Just 11% of the I&M cases were resolved through a liquidation outcome, which was slightly below the 13% piecemeal asset sale liquidation rate among the 204 companies in Fitch’s case study database. The most common case outcome was reorganization as a privately held going concern, which encompassed 63% of the sector case outcomes.

Low Sector Default Rate: The I&M sector’s 2.4% average annual default rate was materially lower than the 4.1% average U.S. high-yield bond market rate from 1980 to 2015. Sector default rate peaks were also lower, and the I&M rate was just 0.6% in 2015. This may be explained by the fact that general manufacturers are a diverse group with a broad range of business risks and lack sector-wide exposure to swings in any single commodity price

Idiosyncratic Default Drivers: Most bankruptcy filings were made by highly leveraged companies that were confronted by individual liquidity or business challenges that could not be overcome out of court. Drivers included flawed business models, production problems, accounting issues, higher raw material costs, lack of funding market access and steep declines in demand for key products due to cyclical downturns or competition. More than half the sample defaulted in the recessionary period from 2008 to 2010.

Small Issuers at Risk: The I&M sector is dominated by global-scale competitors with billions of dollars in assets and investment-grade credit profiles. However, over 85% of the I&M cases analyzed had assets of less than $1 billion, and most were significantly smaller. Most of the general manufacturers in the study had relatively limited product or customer diversity. Median petition date assets and debt for sector cases were $347 million and $380 million, respectively. Across all corporate sectors, defaulters in the database had median assets of $732 million and debt of $613 million (as the early editions focused on the largest cases).

Disclaimer: Fitch cautions that the case studies are not intended to provide exact recovery outcomes, valuations or legal opinions. Estimates in this report may vary significantly from final case outcomes. Related Research Fitch U.S. High Yield Default Insight (January 2016) Fitch U.S. Leveraged Loan Default Insight (December 2015) Healthcare, Food, Beverage and Consumer Bankruptcy Enterprise Value and Creditor Recoveries (Fitch Case Studies ― Edition VIII) (August 2015) Energy, Power and Commodities Bankruptcy Enterprise Value and Creditor Recoveries (Fitch Case Studies — Edition VII) (April 2015) Automotive Sector Bankruptcy Enterprise Value and Creditor Recoveries (Fitch Case Studies Edition VI) (December 2014)

Analysts Leveraged Finance Sharon Bonelli +1 212 908-0581 [email protected] John Shen-Sampas +1 212 612-7881 [email protected] Industrials Akin Adekoya +1 212 908-0312 [email protected]

Craig Fraser +1 212 908-0310 [email protected]

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Leveraged Finance

Case Studies in Industrial and Manufacturing Bankruptcy Enterprise Value and Creditor Recoveries 2 January 28, 2016

Case Study Table of Contents Case Study Page Case Study Page Aleris International, Inc. 12 National RV Holdings, Inc. 54 American LaFrance, LLC 15 Neenah Enterprises, Inc. 57 AMTROL Holdings, Inc. 18 The Newark Group, Inc. 60 Atrium Companies, Inc. 21 Oneida Ltd. 63 Chassix Inc. 24 O’Sullivan Industries, Inc. 66 Colt Defense LLC 27 Panolam Industries International, Inc. 69 EaglePicher Holdings Inc. 30 Propex Inc. 72 Exide Technologies 33 Reddy Ice Holdings, Inc. 75 Fedders Corporation 36 Simmons Company 78 Global Power Equipment Group Inc. 39 Solyndra LLC 81 International Aluminum Corp. 42 True Temper Sports, Inc. 84 Masonite Corporation 45 Wellman Inc. 87 Momentive Performance Materials Inc. 48 Wolverine Tube, Inc. 90 Motor Coach Industries International 51

Going Concern Reorganizations Are Customary The vast majority of the 27 I&M cases studied emerged from bankruptcy as going concern operations. This includes companies that emerged as independent stand-alone entities and those that operated under new owners that bought all assets and continued to run the business. The going concern enterprise valuations are detailed on page 3.

However, three of the 27 companies, Fedders Corp., Solyndra LLC and National RV Holdings, Inc., liquidated all assets in piecemeal sale processes and ceased to exist.

Fedders was a heating and air conditioning manufacturer that had shrinking margins in its residential air conditioner and dehumidifier business because of pricing pressures from its two largest customers, Walmart and Home Depot. A decision was made to exit this business. The company made acquisitions in other heating, ventilation and air conditioning business lines, including commercial customer products, but the transition did not go smoothly. New government regulations on energy efficiency also slowed sales. In the liquidation, assets in various business lines were sold piecemeal in numerous transactions and Fitch estimated a company value by summing the proceeds of the sales. Unsecured recoveries were poor.

Solyndra was a startup formed in 2005 that raised money to build and operate photovoltaic solar panel fabrication plants. The company was unable to compete with foreign, state-sponsored manufacturers on price or meet production milestones required by lenders. Cash flow challenges were exacerbated when European government subsidies for solar power were

Related Criteria Recovery Ratings and Notching Criteria for Non-Financial Corporate Issuers (November 2014)

Acquired/Merged/Sales of All Assets

15%

Emerged/Reorganized Private

63%

Liquidated11%

Emerged/Reorganized Public

11%

Industrial and Manufacturing Case Outcome

Source: Company disclosure statements, Fitch Ratings.





Leveraged Finance


reduced. The company was unable to raise additional debt to bridge fund operations until cash flows turned positive following more borrowing to fund construction of a second fabrication facility. All operations were suspended and liquidation ensued, with the sale of the headquarters building bringing in most of the total proceeds. Unsecured creditors were wiped out in the liquidation and junior secured creditors obtained low recoveries.

National RV Holdings was a manufacturer of recreational vehicles. It was a small company with $127 million of petition date assets and limited financial resources. The filing resulted from a steep decline in sales and an increase in costs relating to a serious defect in a sidewall material used in certain of its RVs. This led to recalls and liquidity problems. One division was sold prior to filing to raise cash, and remaining assets, including real estate, work in progress and completed inventory, were sold piecemeal following the filing.

Enterprise Valuation Fundamental enterprise valuations for going concern reorganization plans are usually prepared by third-party advisors and included in the disclosure statement for the proposed reorganization plan that is filed on the case docket. The valuations and estimated claims by priority establish estimated recoveries for each level of creditor prior to claimholder voting on a plan. Fitch uses these fundamental enterprise valuation estimates in many of the cases studies to establish the estimated enterprise value and exit multiples.

In other case studies, Fitch used the proceeds of actual going concern asset sales or piecemeal balance sheet asset liquidations to estimate the amounts available for distributions to prepetition creditors and other claimants on the plan effective date (emergence).

Determining an appropriate going concern valuation used for plan purposes is critical to a successful reorganization and often hotly contested by creditors at different levels of a capital structure, because it determines which seniority of claimholders will assume a control position in the new stock.

Twenty-three of the 27 I&M cases studied by Fitch had sufficient fundamental valuation and EBITDA forecast data available for Fitch to estimate a reorganization multiple of enterprise value to forward EBITDA. Fitch uses the management forecast of EBITDA for the first full year following the year of emergence in calculating reorganization multiples.

Nearly half of the 23 sector cases emerged at exit multiples between 5x and 7x the post-emergence year 1 forecasted cash flow. The distribution chart above compares reorganization multiple for the I&M sector and the total corporate group and illustrates the relative lack of low reorganization multiple outliers below 5x in the I&M sector. Nine of 23 sector defaulters

05

101520253035

≤5.0 5.1–6.0 6.1–7.0 7.1–9.0 ≥9.0

% Total Industrial % Total Cross Sector


Reorganization Multiple Comparison(Enterprise Value/Forward EBITDA, x)

(% of Sample)

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reorganized at a multiple above 7x, which is relatively rich for a bankruptcy emergence valuation.

The 6.3x median reorganization multiple for the I&M defaulters is modestly higher than the 6.0x cross-sector exit multiple in Fitch’s bankruptcy case database. The cross-sector multiple is based on 155 of 204 cases in the database that had multiples available.

The full list of sector reorganization multiples is above.

Two I&M defaulters were reorganized at a very low exit multiple: Chassix Inc. (3.9x) and Wellman Inc. (4.7x) were the two low-end outliers.

Chassix is a producer of precision casting and machining for the automotive sector that was formed in 2013 via the merger of two private equity owned auto equipment manufacturers. The company filed in 2015 due to large decreases in cash flow stemming from production and cost issues. The company’s production facilities required extensive upgrades and repairs, and when auto production levels spiked, the company had trouble keeping up with customer volumes. Manufacturing costs increased and quality suffered.

Chassix’s third-party valuation advisor estimated an enterprise value that was 3.9x of forecasted year 1 (2016) exit EBITDA of $128 million. The management forecast also showed slight declines in EBITDA to $116 million by 2019, and the continuing lackluster cash flow outlook through the later years of the forecast period likely weighed on the estimated valuation. Despite the low multiple, the asset based lending (ABL) lenders obtained full recovery via a debtor in possession (DIP) rollup of their loan, and first-lien note claims received 98% recovery in a debt for equity swap. See the Related Research link to an automotive sector bankruptcy case study published in December 2014 for information on earlier auto sector cases.

Industrial and Manufacturing Bankruptcy Reorganization Multiples Company

EV/EBITDA Reorganization Multiple (x)

Chassix Inc. 3.9 Wellman Inc 4.7 Oneida Ltd. 5.0 The Newark Group, Inc. 5.1 American LaFrance, LLC 5.4 Aleris International, Inc. 5.6 Neenah Enterprises, Inc. 5.7 True Temper Sports, Inc. 6.0 Reddy Ice Holdings, Inc. 6.2 Simmons Company 6.3 Atrium Companies 6.3 Exide Technologies 6.3 AMTROL Holdings, Inc. 6.5 Motor Coach Industries International 6.7 EaglePicher Holdings Inc. 7.3 Momentive Performance Materials Inc. 7.5 O’Sullivan Industries, Inc. 7.8 Masonite Corporation 8.2 Colt Defense LLC 8.8 Wolverine Tube, Inc. 9.5 Global Power Equipment Group Inc. 9.9 Panolam Industries International, Inc. 10.8 International Aluminum Corp. 54.7 Median EV/EBITDA 6.3 EV – Enterprise value. Source: Company disclosure statements and SEC filings, Fitch Ratings.

6.3x Median I&M Sector Reorganization Multiple

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Wellman was a polyester manufacturer that had several business challenges at the time it was valued at a point of low market valuations during the recession in 2008. Both factors likely contributed to the below-average 4.7x multiple. Capacity utilization was low and raw material cost increases were pressuring cash flows. Wellman’s revolver debt was also paid in full via a DIP takeout; however, the first-lien noteholders received a much lower, 34%, recovery.

An outlier on the high end of exit multiples was International Aluminum Corp. The 54.7x multiple reflects management’s very low EBITDA forecast in the first fiscal year following exit of only $1.4 million. In later forecast years, projected EBITDA improves significantly, to $5.6 million in year 2, $11.3 million in year 3 and $15.9 million by year 4. If the year 2 EBITDA forecast is used to estimate the exit multiple, it would be a more typical 6.8x.

Most of the I&M management forecasts anticipated higher post-emergence EBITDA compared with prepetition cash flows. Sixteen of the 27 sector cases had forecasts incorporating growth of EBITDA, six had expectations of lower EBITDA and five had insufficient cash flow information to compare due to going-out-of-business liquidations or lack of disclosure. A comparison of prepetition EBITDA for the year prior to bankruptcy filing and year 1 post-emergence forecasts is shown in Appendix A.

Strong First-Lien Recovery Rates I&M first-lien loans and bonds for the most part realized recoveries that Fitch characterizes as “outstanding” on the Recovery Rating scale (see table at left). The average ultimate first-lien recovery in the sector was 82%, and 28 issues (68% of the 41 first-lien issues) recovered between 91%–100% of the claim amount, a range equivalent to Fitch’s highest recovery rating category, RR1. However, creditor distributions sometimes were at least partially in non-cash forms such as new debt, or equity, even at the first-lien level.

The distribution of first-lien issue recovery rates is shown in the chart below, and the full list of sector case debt issue recoveries for first-lien, second-lien and unsecured issues is provided in Appendix A.

Fitch case study analyses use recovery rate data provided in disclosure statements filed with the bankruptcy courts to collect issue recoveries by seniority when these rates are provided. In other cases, we use the sum of asset sale proceeds and claim size estimates to estimate issue recovery rates by relative seniority.

Although most first-lien claimholders obtained strong recoveries, there were a few low recovery outliers for first-lien debt claims, including Exide Technologies (5%) and Propex Inc. (21%).

Recovery Rating Scale Recovery Rating Recovery (%) RR1 91–100 RR2 71–90 RR3 51–70 RR4 31–50 RR5 11–30 RR6 0–10

Source: Fitch Ratings.

0

5

10

15

20

25

30

0%–10% 11%–30% 31%–50% 51%–70% 71%–90% 91%–100%

(Number of Issues)


Industrial/Manufacturing First-Lien Issue Recovery Rate Distribution

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Exide is a lead battery producer for transportation and industrial applications. The company had two different debt issues secured by a first lien: an ABL facility with a first lien on inventory and receivables that received 100% recovery via a DIP rollup and an 8.75% note that obtained just 5% recovery on the claim and was also entitled to a share of the general unsecured creditors trust on their deficiency claim (nominal additional proceeds). The notes were secured by a first lien on equipment, capital stock and other assets that did not secure the ABL on a first-priority basis. The notes had a second lien on more valuable and liquid ABL collateral.

Propex was a specialized carpet backing and fiber manufacturer for end markets including automotive, concrete reinforcement and bedding. Most assets were sold as a going concern in a court-supervised auction that occurred during the severe recession (March 2009). At that time, demand in two key end markets was quite weak: the automotive and building materials sectors. Of total petition date debt, 60% consisted of first-lien credit facility borrowings, and the auction proceeds provided only about 21% recovery to these lenders after a portion of the sales proceeds were first used to repay borrowings under a DIP facility and other administrative costs.

Debt Reduction I&M defaulters reduced debt in bankruptcy by an average of 62%. Debt balances as of the petition and emergence dates and debt reduction are shown in the table above.

Debt Reduction in Bankruptcy ($ Mil.)

Company Petition Date

Debt Emergence

Debt Debt Reduction in

Bankruptcy % Reduction Aleris International, Inc. 2,600 59 2,541 (98) American LaFrance, LLC 154 186 (32) 21 AMTROL Holdings, Inc. 188 110 78 (41) Atrium Companies, Inc. 656 261 395 (60) Chassix Inc. 680 217 463 (68) Colt Defense LLC 357 186 176 (48) EaglePicher Holdings Inc. 503 288 215 (43) Exide Technologies 1,000 621 379 (38) Fedders Corporation 221 0 221 (100) Global Power Equipment Group Inc. 112 150 (38) 34 International Aluminum Corp. 164 38 126 (77) Masonite Corporation, et al. 2,200 300 1,900 (86) Momentive Performance Materials Inc. 3,826 1,292 2,534 (66) Motor Coach Industries International 767 175 592 (77) National RV Holdings, Inc. 10 0 10 (100) Neenah Enterprises, Inc. 364 149 215 (59) Oneida Ltd. 226 129 97 (43) O’Sullivan Industries, Inc. 260 30 231 (89) Panolam Industries International, Inc. 344 171 173 (50) Propex Inc. 380 0 380 (100) Reddy Ice Holdings, Inc. 472 327 145 (31) Simmons Company 1,000 450 550 (55) Solyndra LLC 900 0 0 (100) The Newark Group, Inc. 387 138 249 (64) True Temper Sports, Inc. 275 40 235 (85) Wellman Inc. 600 135 465 (78) Wolverine Tube, Inc. 237 43 194 (82) Average — — — (62)


62% Average I&M Sector Debt Reduction in Bankruptcy

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Four companies that liquidated or sold all assets as a going concern had 100% debt reduction: Fedders, National RV Holdings, Propex and Solyndra.

In two cases, Global Power Equipment Group, Inc. and American LaFrance LLC, the company emerged from Chapter 11 with higher debt balances than at the timing of filing. In Global Power’s case, a rights offering and large exit facility were completed with proceeds used to make distributions to prepetition creditors. In American LaFrance’s case, the company emerged with still high leverage and later ceased all operations and liquidated assets in an auction six years after emerging from bankruptcy.

Relatively Low Sector Default Rates Average annual high-yield bond default rates for I&M sector issuers ranged from 0.0% to 8.7% from 1980 to 2015, with a long-term annual average of 2.4% over that span. The sector performed better than the high-yield market as a whole in terms of defaults. The annual default rate range for the U.S. market over the same period was 0.20% to 16.4% and the 35-year long-term market average rate was 4.1% (index includes Yankee bonds and rate is par-weighted). The sector and market rate time series is shown in the chart below.

Over the past five years, I&M sector defaults have been sparse, with annual rates below 1% each year. This is a reflection of the diversity of businesses within the sector, an expanding economy and the robustness of capital markets that enabled issuers to push out maturities and raise additional liquidity. The sector has no overarching driver of performance as do more homogeneous commodity sectors, nor is it as volatile as tech-heavy sectors. Fitch classifies certain types of manufacturers in unique sectors, including auto, food, packaging, etc. (see Related Research for case studies), but has included a few of these cases in this edition as they are newer cases that were filed after publication of the sector case study for that particular type of manufacturer.

Sector bankruptcies were concentrated among relatively small, leveraged companies that were unable to cope with business or accounting issues or refinance their debts. More than 50% of the 27 I&M cases studied were filed in the recession years of 2008–2010 amid moribund credit markets and shrinking demand from industrial customers. The sector bankruptcy filings in this report were made from 2005 to 2015.

The median sector case duration from filing date to bankruptcy plan confirmation date was relatively short at five months, and about three-quarters of the cases were resolved within a year. Ten of the sector cases were either prepackaged or prenegotiated filings, for which terms of the restructuring plan were negotiated by the filing date. The short duration of many cases

02468

1012141618

(% of Par)Industrial/Manufacturing Total Market

Source: Fitch Ratings, Bloomberg.

U.S. High-Yield Bond Default Rates(Fitch High-Yield Default Index)

Relatively Low Defaults

• Average I&M Default Rate 2.4%

• Average Cross-Sector U.S. Corporate Default Rate 4.1%

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reflects a lack of filings by heavily unionized or regulated companies and companies with complex capital structures and inter-company transactions.

Sector Default Drivers Causes of sector bankruptcy filings tended to be idiosyncratic, company-specific operating problems. While I&M default rates peaked during the recession, the sector rate lagged the cross-sector market rate. Fitch selects two key drivers from a list of seven for each of its case studies (in addition to providing a more detailed paragraph on the specific case drivers within each write-up). There were no cases where fraud, litigation or extreme events were chosen from the list of seven as key drivers in this sector, although they were contributing factors in some of the cases.

Cyclical Trough More than 50% of the sector defaults analyzed in this edition occurred during the deep recession years of 2008–2010; see distribution chart below.

Cases that were driven by a cyclical trough that reduced sales included Atrium Companies, a manufacturer of windows and doors that suffered from weak new construction and remodeling market demand during the recession. International Aluminum Corp., a producer of aluminum and vinyl building materials, filed for similar market downturn reasons in the same year (2010).

In another cyclical downturn related case, O’Sullivan Industries, Inc., a producer of ready to assemble furniture, was a victim of lower demand for its products, higher costs for particleboard and fiberboard raw materials, and foreign competition.

Flawed Business Model Fitch attributed nine of the I&M filings to “flawed business models” as a key driver: American LaFrance; Chassix; Colt Defense LLC; EaglePicher Holdings Inc.; Exide Technologies; Fedders; Global Power Equipment Group; O’Sullivan; and Solyndra.

There were wide-ranging business model issues affecting these nine defaulters, ranging from supply chain issues to accounting and systems problems to start ups that never reached positive cash flow.

For example, American LaFrance, a venerable manufacturer of fire trucks and emergency vehicles, was spun off from another owner in 2005 and began to experience serious tracking

I&M Bankruptcy Characteristics Low Sector Default Rates Short Duration of Bankruptcies Wide Range of Causal Factors Relatively Small Companies Few Liquidation Outcomes

Key I&M Default Drivers Deep Cyclical Trough Flawed Business Model Legacy Liabilities Untenable Capital Structure

02468

101214161820

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

(% of Cases)Industrial Manufacturing Sample


Bankruptcy Filing Year

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issues for sales, inventory and accounting when it was monitoring on a stand-alone basis. This caused production and delivery delays.

In a second example, component maker Eagle Picher Industries experienced higher costs due to disruptions in steel supply, higher mining and energy costs, lower selling prices, and plant restructuring and start-up costs in China.

Legacy Liabilities The need to resolve legacy liabilities was a key factor in the Exide Technologies and Global Power Equipment Group filings.

In Exide’s case, a major lead recycling facility in California that provided raw materials for battery production was shut down by regulators for violating environmental standards and the company faced large tort claim liabilities relating to this facility.

In Global Power’s case, the company had an unprofitable fixed-price contract for construction of a heat recovery steam generator. This burdensome contract was rejected in bankruptcy.

Untenable Capital Structure This was the most common key driver selected by Fitch from the list of seven. An unsustainable capital structure was a key factor for 20 of the cases. In some, leverage became high well prior to the filing date as a result of a going private or other leveraging transaction done based on rosy projections that did not pan out. In other cases, the company faced looming maturities or had covenant violations that could not be resolved outside of restructuring and faced a more sudden liquidity crisis.

The median petition date leverage for 19 I&M cases for which this ratio could be estimated was 12.2x. The median emergence date leverage was a much more manageable 3.8x.

I&M Sector vs. Cross-Sector Case Studies Key attributes of the I&M case sample compared to the cross-sector database are summarized in the table above.

Comparison of I&M and Overall U.S. Corporate Bankruptcies

Industrial and Manufacturing Sector

Cross-Sector U.S. Corporate Cases

Number of Bankruptcy Cases Analyzed 27 204 Median Petition Date Assets ($ Mil.) 347 649 Median Petition Date Debt ($ Mil.) 380 585 Case Length (Months to Confirmation) 5 9 Percentage of Filings with Prepackaged or Prenegotiated Plans (%) 37 36 Percentage of Cases with Liquidation Outcomes (%) 11 13 Median Reorganization Multiple (x) 6.3 6.0 Median Debt Reduction in Bankruptcy (%) 60 72 Prepetition Leverage Ratio (Debt/EBITDA)a (x) 12.2 9.4 Emergence Date Leverage Ratio (x) 3.8 3.6 aMedian prepetition leverage ratio includes 19 industrial sector companies. The median excludes six industrial sample companies with negative prepetition EBITDA and two companies with no EBITDA disclosure. Note: Median emergence date leverage ratio for the cross-sector group includes 152 companies. The ratio was negative or not available for the remaining 52 companies in Fitch’s case database. Source: Company reports, Fitch Ratings.

Median Petition Date Leverage 12.2x

Median Emergence Date Leverage 3.8x

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Appendix A

Recovery Rates by Claim Seniority (% of Par Value)

Company First Lien Second Lien Unsecured Subordinateda Aleris International, Inc. 100/18/26 — 1 — American LaFrance, LLC 100 — — — AMTROL Holdings, Inc. 100 100 72 — Atrium Companies, Inc. 98 — 4 2 Chassix Inc. 100/67 — 7 — Colt Defense LLC 100/100 — 10 — EaglePicher Holdings Inc. 100 — 71 — Exide Technologies 100/5 — — 0 Fedders Corporation 100/53 — 2 — Global Power Equipment Group Inc. 100 — — 97 International Aluminum Corp. 100 — — 0 Masonite Corporation 38 — — 5 Momentive Performance Materials Inc. 100 100/20b — 0 Motor Coach Industries International 100 100/17c — 0/0 National RV Holdings, Inc. 100 — — — Neenah Enterprises, Inc. 100/57 — — 4 Oneida Ltd. 100/51 — — — O’Sullivan Industries, Inc. 100/83 — 0 0 Panolam Industries International, Inc. 100/100/100 — — 49 Propex Inc. 21 — 2 — Reddy Ice Holdings, Inc. 100/100 28 50 3 Simmons Company 100 — 83 3 Solyndra LLC 100 14 0 — The Newark Group, Inc. 100/100 — 75 33 True Temper Sports, Inc. 100 22 0 — Wellman Inc. 100/35 0 — — Wolverine Tube, Inc. 66 — — — Median Recovery Rate 100 21 6 3 Average Recovery Rate 82 Not Applicable 27 14 aSubordinated includes structural holdco unsecured issues and contractually subordinated issues. bIncludes 1.5 lien issue at 100% and second-lien issue with midpoint recovery rate of 20%. cIncludes second-lien issue at 100% and third-lien issue with midpoint recovery rate of 17%. Note: Recovery rates on multiple issues at the same level of capital structure are separated by “/”. If recovery rates were in a range as estimated in the disclosure statement, Fitch takes midpoint value for this table. Source: Company disclosure statements, Fitch Ratings.

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Appendix B

Comparing Prepetition and Post-Emergence EBITDA ($ Mil.)

Company Prepetition EBITDA Post-Emergence EBITDA Forecast American LaFrance, LLC (51) 28 AMTROL Holdings, Inc. 26 27 Atrium Companies, Inc. 54 67 Chassix Inc. 22 128 Colt Defense LLC 12 22 EaglePicher Holdings Inc. 70 65 Exide Technologies 104 102 Fedders Corporation (14) Not Applicable Global Power Equipment Group Inc. 4 23 International Aluminum Corp. 31 2 Momentive Performance Materials Inc. 223 297 Motor Coach Industries International 20 58 National RV Holdings, Inc. (10) Not Applicable Neenah Enterprises, Inc. (8) 52 Oneida Ltd. (20) 38 O’Sullivan Industries, Inc. 2 14 Panolam Industries International, Inc. 39 24 Propex Inc. 50 Not Applicable Simmons Company 84 121 Solyndra LLC Not Available Not Applicable True Temper Sports, Inc. 29 19 Wellman 29 41 Wolverine Tube, Inc. 7 11 Aleris International, Inc. (22) 190 Masonite Corporation 162 61 The Newark Group, Inc. Not Available 60 Reddy Ice Holdings, Inc. 44 66 Source: Company disclosure statements, Fitch Ratings.

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Aleris International, Inc. ($ Mil., Except Where Noted)

Issuer Profile Fitch Industry Classification Metals and Mining Subsector Aluminum Product Producer Prepetition Ticker Symbol Not Publicly Traded Petition Date Assets 5,121 Emergence Parent Company Name/Ticker Aleris International/Privately Held

Bankruptcy Summary Did All Entities in the Group File?a No Plan Proposed by Debtor Court District` Delaware Substantive Consolidation Yes Petition Date 2/12/09 Confirmation or Conversion Date 5/13/10 Effective Date 6/1/10 Duration (Months) 15 Filing — Type Chapter 11 Section 363 Asset Sale by Debtor No Voluntary or Involuntary Filing Voluntary Postconfirmation Liquidating Trust Not Available Resolution Emerged/Reorganized (Private)

Events Leading Up to Bankruptcy (or Contributing Factors) Aleris International, Inc. (Aleris) expanded through mergers and acquisitions in the years prior to the bankruptcy. In December 2006, the company was purchased by Texas Pacific Group in a going private transaction. In conjunction with the buyout, the company increased its bank facility commitments and issued $1 billion of new notes, which resulted in high leverage. The global economic downturn adversely affected the aluminum industry. Aleris’ customers in the building and construction and automotive industries reduced their aluminum purchases during the recession. The profitability of the company’s rolled and extruded products businesses suffered as a result of lower volumes, and margins were reduced because of decreasing per-pound selling prices. These factors led to a liquidity crunch as well as margin calls on transactional hedges and a high interest expense burden. The borrowing base on the asset-based loan facility declined by more than 50% in the six months prior to the petition date, and lenders demanded repayment of overage borrowings in excess of the remaining borrowing base. The bankruptcy plan was based on a debt to equity conversion with secured creditors becoming the majority owners of the new stock and included a new money investment by certain secured creditors in a $645 million rights offering and $45 million of new notes.

Valuation Estimate Summary Going Concern Valuation The third-party valuation advisor relied primarily on the discounted cash flow and comparable company approaches to estimate the midpoint going concern enterprise value of $1 billion, with $660 million–$830 million of the value attributed to U.S. operations and the remainder to the Aleris Deutschland Holding (ADH) European business. The estimated $1 billion enterprise value consists of the “plan value” or equity value before the proceeds from the rights offering plus the maximum $690 million cash proceeds of the rights offering of new common stock shares. Participation in the rights offering was available to holders of U.S. roll up term loan claims, European term loan claims and European roll up term loan claims that were accredited investors. Liquidation Alternative Valuation The valuation was based on discounts to asset book values as of Sept. 30, 2009 and resulted in gross liquidation proceeds of $464 million from U.S. operations and $1 million from European operations. The percentage of book value applied to various assets included: • Accounts receivable of $119.7 million at 70% of book value. • Inventory of $111 million at 79%. • Property plant and equipment of $146 million at 49%. • U.S. liquidation expenses were estimated at $50 million. • The intercompany receivable of $900 million on ADH’s balance sheet was assumed to have $0 value in the liquidation.

Source, unless otherwise noted: Company disclosure statement for the first amended joint plan of reorganization dated March 22, 2010. Note: This is an update of a case study originally published Feb. 14, 2013.

Key Drivers of Bankruptcy Filing Key Driver Deep Cyclical Trough Key Driver Untenable Capital Structure

Financial Profile 12-Month Period Amount Prepetition EBITDA 12/31/08 (22) Post-Emergence EBITDA Forecast 12/31/11 190 Enterprise Value (EV) Range (or Asset Value) Low 925 High 1,195 Midpoint EV 1,060 Equity Value Range (Including Cash on Hand) Low 222 High 271 Midpoint EV/Post-Emergence EBITDA Estimate (x) 5.6

Petition Date Versus Emergence Date Petition Date Emergence Date Total Debtb 2,600 59 Consolidated Leverage (x) (116.6) 0.3 Debt Shed in Bankruptcy 2,541 Debt Shed in Bankruptcy (%) 98

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Aleris International, Inc. (Continued) Estimated Recoveries for Select Claims ($ Mil., Except Where Noted) Form of Distribution Claim Seniority Claim Type

Allowed Claims

Projected Recovery (%)

Equivalent RR Category Cash

Secured Notes

Unsecured Notes

Subordinated Notes

New Equity

Options/ Warrants

DIP $1,075 Million DIP Facility 650 100 RR1 650 — — — — — Secured U.S. Roll Up Term Loan Claims 527 28 RR5 — — — — 148 — Secured ADH European Roll Up Term Loan N.A. 94–100 RR1 25 — — — — — Secured ADH European Term Loan 340 21.0 RR5 — — — — 71 — Secured U.S. Term Loan Claims 306 1.0 RR6 86 — — — — — Unsecured Various Bond Issues 1,196 1.0 RR6 17 — — — — — Equity Holders of Aleris Equity Interests 0 0.0 RR6 — — — — — — Estimated Claims 3,020 — Recoveries 777 0 0 0 219 0 New Borrowings at Emergencea 59 — — — — — — — —

Debt of Nonfiling Affiliates on Emergence Date 0 — — — — — — — —

Claim Seniority Claim Type Description DIP $1,075 Million DIP Facility (Consisting of

$575 ABL Roll Up DIP and $500 New Money Term Loan DIP)

• $575 million ABL roll up revolver and $500 million new money term loan (claim amount is a rough Fitch estimate based on borrowings as of November 2009).

• The prepetition ABL debt was refinanced with the DIP. • Guaranteed by each U.S. debtor and other domestic subsidiary and certain European affiliates. • ABL DIP revolver collateral: first lien on accounts receivable, inventory and intangible assets and a second

lien on other collateral. • Term loan DIP collateral: first lien on property and equipment and second lien on the ABL collateral. • Repaid in cash using proceeds from the rights offering of up to $690 million of new common stock, which

was also used for other cash distributions under the plan and for liquidity post emergence. Secured U.S. Roll Up Term Loan Claims

(USD436 Million and USD Equivalent of EUR70.9 Million at $1.29 per Euro)

• Pursuant to the DIP order, prepetition term loan lenders were permitted to roll up a portion of the amount owed by the U.S. debtors into the DIP.

• Fitch estimates a blended recovery rate on the rolled up/non rolled up loan of approximately 18%. Received pro rata share of U.S. roll up stock and U.S. subscription rights or cash.

Secured ADH European Roll Up Term Loan • Received ADH roll up stock and the ADH roll up subscription rights or cash equal to $25 million. Secured ADH European Term Loan (USD286 Million

and USD Equivalent of EUR53.2 Million) • Secured by a separate collateral package than the U.S. term loan that included bank accounts, intellectual

property rights, certain stock in certain subsidiaries, and/or moveable property. • Received distributions in the form of ADH term loan stock or cash.

Secured U.S. Term Loan Clams (USD220.1 Million and USD Equivalent of EUR67 Million)

• The non-rolled up portions of the term loans were treated as unsecured claims in the plan.

Unsecured Various Bond Issues • Includes $598 million of 2006 notes plus prepetition interest, $105.4 million of 2007 notes and $399 million of unsecured notes.

Equity Holders of Aleris Equity Interests • Received $0 distributions. • Deemed to have rejected the plan of reorganization.

aNew borrowing estimate includes $45 million of subordinated notes and $14 million under new $500 million ABL facility. RR – Recovery Rating. DIP – Debtor in possession. ABL – Asset-based loan. N.A. – Not available. Source, unless otherwise noted: Company disclosure statement for the first amended joint plan of reorganization dated March 22, 2010. Note: This is an update of a case study originally published Feb. 14, 2013.

Leveraged Finance


Aleris International, Inc. (Continued) Additional Information Cash on Filing Date Not disclosed. Cash of $48.5 million as of Dec. 31, 2008, as per balance sheet dated Dec. 31, 2008. Prepetition Bank Facility Commitments $809 million senior secured ABL facility. There was no remaining facility availability on the petition date, and

outstanding borrowings exceeded the maximum borrowing base. Prepetition Bank Facility Borrowings on Filing Date $201.8 million borrowings and $42.2 million letters of credit drawn under ABL facility. Was the DIP a New Money Facility or Roll Up of a Prepetition Facility?

The $1,075 million DIP included a roll up of the prepetition $575 million ABL facility debt and a new money $500 million term loan facility.

Executory Contracts Not disclosed. Deficiency Claims Yes, the deficiency claim portion of the non-rolled up term loans were treated as unsecured claims. Intercompany Claims U.S. affiliate claims were reinstated or otherwise left unimpaired. Pension Claims/Motions The plan confirmation was subject to the termination of three union pension plans covering employees at three

facilities in West Virginia, Ohio and Kentucky. The company had not yet started negotiations with the unions as of the disclosure statement date for a consensual modification. If a consensus is not reached, the plans may still be terminated if the court agrees, but this could leave the company subject to strike. If the plans were terminated, this will dilute recovery for unsecured creditors.

Postpetition Interest? Yes If Yes, Recipient Class Secured Concession Payments Yes Recipient Unsecured creditors.

DIP – Debtor in possession. ABL – Asset-based loan. Source: Fitch Ratings, amended disclosure statement dated March 22, 2010. Note: This is an update of a case study originally published Feb. 14, 2013.

Leveraged Finance


American LaFrance, LLC ($ Mil., Except Where Noted)

Issuer Profile

Key Drivers of Bankruptcy Filing

Fitch Industry Classification Industrial/Manufacturing Key Driver Flawed Business Model or Obsolete Product Subsector Manufactures Ambulances and Other

Specialized Rescue Vehicles Key Driver Deep Cyclical Trough

Financial Profile Prepetition Ticker Symbol Not Publicly Traded Petition Date Assets 189 Emergence Parent Company Name/

Ticker American LaFrance/ Privately Held

12-Month Period Amount

Prepetition EBITDA 12/31/07 (51)

Bankruptcy Summary Post-Emergence EBITDA Forecast 12/31/09 28

Did All Entities in the Group File? Yes

Enterprise Value (EV) Range (or Asset Value Range) Plan Proposed by Debtor

Low 150

Court District Delaware

High 150 Substantive Consolidation Yes

Midpoint EV (Value) 150

Petition Date 1/28/08

Equity Value Range Confirmation or Conversion Date 5/23/08

Low (41)

Effective Date 7/24/08

High (41) Duration (Months) 4

Midpoint EV/Post-Emergence EBITDA Estimate (x) 5.4

Filing — Type Chapter 11 Section 363 Asset Sale by Debtor Yes — Sale of Substantially All Assets

(as Going Concern)

Petition Date Versus Emergence Date

Voluntary or Involuntary Filing Voluntary

Petition Date Emergence Date Postconfirmation Liquidating Trust Yes

Total Debt 154 186

Resolution Section 363 Sale and Liquidating Plan

Consolidated Leverage (x) (3.0) 6.7

Debt Shed in Bankruptcy — (32)

Debt Shed in Bankruptcy (%) — (21)

Events Leading Up to Bankruptcy (or Contributing Factors) American LaFrance, LLC’s (ALF) Chapter 11 filing was driven by several factors, including significant operational difficulties encountered when the business was separated from its former parent, Freightliner LLC, reduced demand for new firetrucks during the recession due to municipal budget cuts and other problems. When ALF initially separated into a standalone business in December 2005, many of its reporting systems and management roles were outsourced to Freightliner LLC per a transition services agreement. The services agreement terminated in 2007 and when ALF assumed responsibility, the company immediately experienced serious tracking issues for inventory, sales, vehicle orders, accounts receivable, and general ledger balances. The inventory tracking problems caused delays in timely vehicle deliveries to customers. This adversely affected cash flows and triggered a liquidity crisis. Moves to new production facilities and a new headquarters building caused additional business disruptions. The company was not generating sufficient cash flows to cover operating expenses and debt service and the company posted losses in 2006 and 2007. All of these problems were compounded by a depressed market for new emergency vehicles during the economic recession.

Valuation Estimate Summary Value Determined by Sale of All Assets in a Credit Bid The agent for the prepetition credit facility, Patriarch Partners Agency Services LLC (Patriarch), made a $150 million credit bid for ALF’s assets. There were no higher bids, and the company’s assets were transferred in the credit bid. Patriarch was also the owner of the company since 2005 as well as the DIP and secured prepetition lender. Patriarch invested $500,000 in new equity to fund a portion of the reorganization plan. Separately, the company emerged as a still-highly leveraged entity, and operating problems continued. ALF permanently ceased all operations and auctioned remaining inventory and other assets in 2014. Liquidation Value Alternative The liquidation alternative analysis was based on percentages applied to the unaudited asset book values on the balance sheet for Dec. 31, 2007 and resulted in estimated gross proceeds of $75.1 million under a forced auction in the current economy. The asset book values and percentages included: • Cash and equivalents of $28.7 million at 100% • Accounts receivables of $19.8 million at 75% • Raw materials of $40.4 million at 25% • Work in progress of $45.9 million at 18.5% • Net PP&E of $30.9 million at 37%. Under this alternative, the secured lenders would have recovered approximately 9%.

Source, unless otherwise noted: Fourth amended disclosure statement in support of the third amended plan of reorganization dated March 27, 2008.

Leveraged Finance


American LaFrance, LLC (Continued) Estimated Recoveries for Select Claims ($ Mil., Except Where Noted)

Form of Distribution

Claim Seniority Claim Type Allowed Claims



Secured Notes

Unsecured Notes

Subordinated Notes

New Equity

Options/ Warrants

DIP and Priority DIP Facility Loans 50 100.0 RR1 — 50 — — — — Secured $150 Million First-Lien Facility 138 100.0 RR1 — 134 — — 4 — Secured Performance Bonds and Letters of Credit 29 100.0 RR1 — 29 — — — — Unsecured Vendor, Warranty and Other 63 22.5 RR5 14 — — — — —

Estimated Claims 280 — Recoveries 14 213 0 0 4 0

New Borrowings at Emergence 186 — — — — — — — —

Debt of Nonfiling Affiliates on Emergence Date

0 — — — — — — — —

Claim Seniority Claim Type Description DIP and Priority DIP Facility Loans • The DIP was provided by the prepetition lender and owner of the company.

• Loans were paid in full using a portion of the proceeds from the $186 million exit facility. Secured $150 Million First-Lien Facility • Distributions consisted of $134 million of proceeds from the $186 million exit facility financing and $4 million

of new common equity. Secured Performance Bonds and Letters of

Credit • Fitch assumes that ALF performed as planned under various municipal and government contracts, and

these performance bonds rolled off when projects were completed. Unsecured Vendor, Warranty and Other • Warranty claims estimated at $7.1 million.

• Holders received recoveries in cash, with approximately $6 million paid on the effective date and the remaining recoveries paid from time to time post-emergence using proceeds from the trust that was created to administer assets left behind following the sale of the company. These include avoidance action and litigation trust proceeds.

RR – Recovery Rating. DIP – Debtor in possession. Source, unless otherwise noted: Fourth amended disclosure statement in support of the third amended plan of reorganization dated March 27, 2008.

Leveraged Finance


American LaFrance, LLC (Continued) Additional Information Cash on Filing Date $6.47 million of unrestricted cash and $24.7 million of restricted cash to secured obligations under certain

performance and bid bonds required in connection with ALF’s public projects. Prepetition Bank Facility Commitments $150 million credit facility. Prepetition Bank Facility Borrowings on Filing Date $150 million. Was the DIP a New Money Facility or Roll Up of a Prepetition Facility?

The $50 million DIP was a new money facility that was provided by the prepetition lender and owner, Patriarch.

Other Notable Issues None Executory Contracts Of the 316 fire trucks in the construction contract backlog on the petition date, ALF determined it may reject

over 30 unprofitable truck contracts. Deficiency Claims No Contingent Claims and/or Contingent Recoveries Litigation and avoidance action proceeds were to be distributed to unsecured creditors to the extent received.

Performance bonds secured by letters of credit would become claims if ALF did not perform obligations to the applicable customers.

Intercompany Claims — Pension Claims/Motions Not available. Postpetition Interest? Not available. If Yes, Recipient Class Not available. Concession Payments Yes Recipient and Comments Unsecured lenders.

DIP – Debtor in possession. Source: Fitch Ratings, company disclosure statement dated March 27, 2008.

Leveraged Finance


AMTROL Holdings, Inc. ($ Mil., Except Where Noted)

Issuer Profile


Fitch Industry Classification Industrial/Manufacturing Key Driver Untenable Capital Structure Subsector Manufactures Storage and Pressure

Control Products for Water and HVAC Systems

Key Driver Deep Cyclical Trough

Financial Profile Prepetition Ticker Symbol Not Publicly Traded Petition Date Assets 222

12-Month Period Amount Emergence Parent Company Name/ Ticker

AMTROL/ Privately Held

Prepetition EBITDA 12/31/05 26 Post-Emergence EBITDA Forecast 12/31/07 27

Bankruptcy Summary

Enterprise Value (EV) Range (or Asset Value Range)

Did All Entities in the Group File?a No Low 165 Plan Proposed byb Joint Plan of Debtor and Creditor

High 185


Midpoint EV (Value) 175 Substantive Consolidation Yes



Low 64


High 85 Duration (Months) 5


Filing — Type Chapter 11 Petition Date Versus Emergence Date Section 363 Asset Sale by Debtor No Voluntary or Involuntary Filing Voluntary

Petition Date Emergence Date Postconfirmation Liquidating Trust No

Total Debt 188 110

Resolution Emerged/Reorganized (Private)

Consolidated Leverage (x) 7.1 4.1

Debt Shed in Bankruptcy — 78

Debt Shed in Bankruptcy (%) — 41

Events Leading Up to Bankruptcy (or Contributing Factors) The company had a substantial working capital deficit in the year prior to the filing because all $187.5 million of the company’s secured and unsecured debt was scheduled to mature in December 2006. In addition, the company experienced higher raw materials costs for resins and other inputs to its products in 2005, and it was uncertain how much of the increase could be passed through to customers due to a competitive market. The company attempted to extend maturities and recapitalize prior to the looming maturity dates, and also had been trying to raise cash through sales of some or all assets. An out-of-court restructuring of the unsecured debt was proposed, which would have converted the 10.625% notes to a majority of the company’s equity, but after extensive due diligence in the second and third quarters of 2006, the noteholders informed the company that it did not want to complete the debt-for-equity swap transaction. Another attempt to sell the company resulted in no bid. The original majority holder of the 10.625% notes sold its holdings and the new holders of the majority of the notes reached an agreement with the company to support a conversion of the notes to equity under Chapter 11.

Valuation Estimate Summary Going Concern Enterprise Valuation The third-party valuation advisor estimated an enterprise value range of $165 million–$185 million. The advisor utilized a discounted cash flow analysis, a comparable company market value analysis and a comparable company acquisition multiple analysis to value the company. There was no disclosure of the assumptions used under these three methods. The advisor relied on management forecasts, which included EBITDA as follows: ($ Mil.) 2008 2009 2010 EBITDA 27.0 28.8 31.2 Liquidation Value Alternative The Chapter 7 alternative analysis estimated gross liquidation proceeds of $81 million, wind-down expenses of $3 million and Chapter 7 administrative and priority claims of $11 million. The $67 million of proceeds would have provided 68% recovery to the DIP holders and no recovery to the unsecured notes claims. The analysis was based on percentage of asset book value as of April 30, 2007 including: • Accounts receivable of $16 million at 85% of book value • Inventories of $18.6 million at 44.5% • Assumed sales proceeds from non-debtor European operations of $44.1 million • Intellectual property of $95.3 million at 5.2% aExcluded foreign subsidiaries that collectively accounted for 28.7% of fiscal year 2005 net sales (excluding Canada). bPlan jointly proposed by the debtors and the official committee of unsecured creditors. DIP – Debtor in possession. Source, unless otherwise noted: Disclosure statement dated March 3, 2007.

Leveraged Finance


AMTROL Holdings, Inc. (Continued) Estimated Recoveries for Select Claims ($ Mil., Except Where Noted)


Claim Seniority Claim Type

Allowed Claims



Secured Notes

Unsecured Notes

Subordinated Notes

New Equity

Options/ Warrants

DIP and Priority Administrative, DIP and Priority Tax 100 100.0 RR1 100 — — — — — Secured $30 Million of Borrowings Under the

First-Lien ABL Revolver and Term Loan Facilities due 2006

0 100.0 RR1 — — — — — —

Secured $59.8 Million Second-Lien Term Loan Facility (Pay in Kind) due 2006

0 100.0 RR1 — — — — — —

Secured Other Secured Claims Not Available 100.0 RR1 — — — — — — Unsecured 10.625% Senior Notes due 2006 103 62–82 RR3 — — — — 74 — Intercompany Intercompany Not Available 0.0 RR6 — — — — — — Equity Old Common Equity Not Available 0.0 RR6 — — — — — —


New Borrowings at Emergencea 110 — — — — — — — —


0 — — — — — — — —

Claim Seniority Claim Type Description DIP and Priority Administrative, DIP and Priority Tax • Paid in full in cash with proceeds of the exit facility.

• The DIP was used to refinance the $90 million of prepetition first-lien and second-lien borrowings. • Fitch estimates $10 million of administrative claims and priority tax claims based on the enterprise value and

the distributions to other claimholders. The actual amount of these claims was not provided. Secured $30 million of Borrowings Under the

First-Lien ABL Revolver and Term Loan Facilities due 2006

• $30 million of petition date borrowings were repaid in full with the DIP facility. • Borrowings included $2.1 million Term Loan A, $18.8 million Term Loan B and $8.9 million ABL revolver

borrowings. Secured $59.8 Million Second-Lien Term Loan

Facility (Pay in Kind) due 2006 • Petition date borrowings, including pay in kind interest and principal, were refinanced with the DIP facility. • Borrowings consisted of original term loan of $35 million plus $24.8 million of accrued 12% PIK interest.

Secured Other Secured Claims • Unimpaired. • Paid in cash, reinstated, paid on such other terms as the parties agree, or satisfied through the surrender of

collateral. Unsecured 10.625% Senior Notes due 2006 • Holders received distributions in the form of 100% of the new common equity, subject to dilution for the

management incentive plan. • Holders that voted to reject the plan or do not expressly elect to receive the new equity shares received 60%

distributions in cash. • Claim consists of $97.8 million of principal and $4.8 million of accrued and unpaid interest.

Intercompany Intercompany • Holders were not entitled to receive any distributions or retain any property on account of their claims. • Debtors had right to retain, transfer of setoff intercompany claims as appropriate for accounting, tax and

commercial reasons. Equity Old Common Equity • $0 recoveries.

• Deemed to have rejected the plan. aExit financing consisted of a $110 million term loan and a $25 million undrawn exit revolver. RR – Recovery Rating. DIP – Debtor in possession. Source, unless otherwise noted: Disclosure statement dated March 3, 2007.

Leveraged Finance


AMTROL Holdings, Inc. (Continued) Additional Information

Cash on Filing Date Not available. Prepetition Bank Facility Commitments ABL revolver providing the lesser of a) $30 million less the aggregate amount of outstanding Term Loan A less

letter of credit usage and b) the borrowing base formula amount less the letter of credit usage. Prepetition Bank Facility Borrowings on Filing Date $8.9 million of ABL revolver borrowings, plus $2.1 million Term Loan A, $18.8 million Term Loan B and

$59.8 million second-lien Term Loan C. Was the DIP a New Money Facility or Roll Up of a Prepetition Facility?

The $115 million DIP was partially a $25 million new money revolver and partially a $90 million roll up of the first-lien and second-lien prepetition revolver and term loan borrowings.

Other Notable Issues Asbestos-related claims and related insurance assets passed through the bankruptcy unaffected and were unimpaired.

Executory Contracts There were no details beyond the disclosure that supplemental retirement plan contracts were assumed. Deficiency Claims None. Secured lenders were paid in full. Contingent Claims and/or Contingent Recoveries No Intercompany Claims No distributions under the plan. The claims were cancelled or reinstated at company’s election. Pension Claims/Motions Supplemental employee retirement plans were treated as assumed executory contracts. Benefit, healthcare

and disability. Postpetition Interest? Yes If Yes, Recipient Class Secured Concession Payments Yes Recipient and Comments Non-debt unsecured claims were paid in full in cash or reinstated. No disclosure of the amount of this class of

claims.


Leveraged Finance


Atrium Companies, Inc. ($ Mil., Except Where Noted)

Issuer Profile Key Drivers of Bankruptcy Filing Fitch Industry Classification Industrial/Manufacturing Key Driver Untenable Capital Structure Subsector Manufactures Windows and Door Products


Prepetition Ticker Symbol Not Publicly Rated Financial Profile Petition Date Assets 347 Emergence Parent Company

Name/Ticker Atrium Companies/Privately Held 12-Month Period Amount

Prepetition EBITDAb 12/31/09 54


Did All Entities in the Group File?a No


Low 420


High 420 Substantive Consolidation No




Low 168




Filing — Type Chapter 11 (Prepackaged) Petition Date Versus Emergence Date Section 363 Asset Sale by Debtor Yes — Sale of Substantially All Assets (as

Going Concern) Voluntary or Involuntary Filing Voluntary

Petition Date Emergence Date Postconfirmation Liquidating Trust Choose

Total Debt 656 261

Resolution Acquired, Merged or Sold




Events Leading Up to Bankruptcy (or Contributing Factors) Atrium’s debt/EBITDA exceeded 12x by the time of filing. The company’s highly leveraged capital structure became untenable when demand for its window and door products significantly declined as a result of the collapse in housing prices and credit crunch. In addition, the lack of consumer confidence reduced demand from home remodelers, which further hurt sales. To try to cope with the adverse market environment, the company completed a debt-for-equity exchange of 97.4% of the ACIH Inc. notes, amended its credit facility and pursued cost reduction initiatives, such as headcount reduction to 3,990 from 7,300 and consolidation of manufacturing facilities. However, further realignment of the balance sheet was needed, and a restructuring support agreement was reached with senior lenders that provided for a new equity investment by the owner of the common stock.

Valuation Estimate Summary Fundamental Going Concern Valuation The third party valuation advisor estimated a going concern enterprise valuation of $420 million (midpoint, no range disclosed). The valuation resulted from several methodologies, including a discounted cash flow analysis, peer market trading values, and peer precedent merger and acquisition transaction values. The assumptions and names of peers were not provided. The valuation includes excess cash and net operating losses. The advisor’s considered various information, including management’s forecast of EBITDA:

($ Mil.) 2011 2012 2013 2014 EBITDA 66.7 81.00 97.3 110.0 Valuation Based on Settlement Agreement Incorporating New Money Equity Investment The plan of reorganization was based on a new equity investment by Kenner & Company, Inc. and Golden Gate Capital of $192.2 million in exchange for 92.5% of the new common equity. Proceeds of this new equity investment, along with proceeds of new exit debt of $261 million were used to fund payments under the plan. The enterprise value used for purposes of this settlement is approximately $460 million. During the bankruptcy, a sale process for the company was initiated. Interested parties received information for due diligence review. One bidder, Griffon, made a $463 million acquisition proposal ($456.5 million cash), but ultimately the new equity investment alternative was pursued and Kenner and Golden Gate became the majority shareholders.

Liquidation Value Alternative The Chapter 7 liquidation alternative estimated gross proceeds in the range of $80.6 million–$104.4 million. The analysis was based on percentages of the book value of assets on the balance sheet as of Nov. 30, 2009. The assets and percent ranges applied included: • Cash of $27.6 million at 100% • Accounts receivable of $18.8 million at 55%–70% • Inventory of $38 million at 33%–50% • Property, plant and equipment of $88.9 million at 34%–46% • Goodwill and other intangibles of 148.5 million at 0%–2% Under this alternative reorganization scenario, the senior secured credit facility lenders would have recovered 18%–22% of their claim amount. aThe Canadian subsidiary, Northstar Window, filed a separate reorganization proceeding in Canadian court. bPrepetition EBITDA is Fitch estimate based on disclosure statement note that prepetition debt leverage exceeded 12x. Source, unless otherwise noted: Second modified disclosure statement for the first modified joint plan of reorganization dated March 18, 2010.

Leveraged Finance


Atrium Companies, Inc. (Continued) Estimated Recoveries for Select Claims ($ Mil., Except Where Noted)





Secured Notes

Unsecured Notes

Subordinated Notes

New Equity

Options/ Warrants

DIP and Priority DIP Claims 27 100.0 RR1 27 — — — — — Secured First-Lien Secured Revolver and

Term Loan due 2011 383 98.0 RR1 375 — — — — —

Unsecured 11% Senior Subordinated Notes Claims due 2012

48 3.9 RR6 — — — — 5 —


220 3.9 RR6 — — — — 8 —

Unsecured Qualified Unsecured Trade Claims Not Available

100.0 RR1 — — — — — —

Unsecured General Unsecured Claims Not Available

4.0 RR6 — — — — — —

Unsecured ACIH Inc. 11.5% Notes due 2012 5 2.0 RR6 0.1 — — — — — Equity Interests None 0.0 RR6 — — — — — —


New Borrowings at Emergence a) 261 — — — — — — — —


0 — — — — — — — —

Claim Seniority Claim Type Description DIP and Priority DIP Claims • Holders of DIP claims were paid in full in cash. Secured First-Lien Secured Revolver and

Term Loan due 2011 • Borrowings consisted of $34.1 million under the revolver and $335 million under the term loan. • Secured by a first lien on all assets and capital stock of subsidiaries. • Related swap claims were paid in full.


• Distributions received in the form of a minority share of the new common stock. • Holders shared 7.5% of the new equity with the 15% noteholders. The balance of the new stock was sold to

the new equity investors. Unsecured 15% Senior Subordinated Notes

Claims due 2012 • Distributions received in the form of a minority share of the new common stock. • Holders shared 7.5% of the new equity with the 11% noteholders. The balance of the new stock was sold to

the new equity investors. Unsecured Qualified Unsecured Trade Claims • Paid in full in cash on the effective date or in the ordinary course of business provided they participate in a

qualified vendor support agreement. Unsecured General Unsecured Claims • Received recovery of approximately 4% on the dollar from a distribution escrow account Unsecured ACIH Inc. 11.5% Notes due 2012 • In October 2008, the company exchanged 97.5% of the original $186 million ACIH Inc. note issue for the 15%

senior subordinated notes and equity warrants. Equity Interests • No distributions.

• Old equity was cancelled. aProjections estimate $36 million of borrowings under a new $65 million revolving facility and $200 million of new term loan debt at exit, plus accounts receivable facility debt. RR – Recovery Rating. DIP – Debtor in possession. Source, unless otherwise noted: Second modified disclosure statement for the first modified joint plan of reorganization dated March 18, 2010.

Leveraged Finance


Atrium Companies, Inc. (Continued) Additional Information

Cash on Filing Date Not available. $27.6 million as of Nov. 30, 2009. Prepetition Bank Facility Commitments $46 million revolver and $335 million term loan. The company had a bankruptcy remote accounts receivable

securitization facility, which was maintained throughout the bankruptcy (not a debtor). Prepetition Bank Facility Borrowings on Filing Date $34.1 million of revolver usage, including $22.7 million of loans and $12.4 million of letters of credit. Was the DIP a New Money Facility or Roll Up of a Prepetition Facility? The $40 million DIP was a new money facility. Other Notable Issues None Executory Contracts The rejected executory contract exhibit in the plan supplement listed certain contracts, including lease

agreements, employee severance agreements, customer service agreement, license agreements, etc. There were also hundreds of assumed contracts listed in an exhibit to the plan.

Deficiency Claims None Contingent Claims and/or Contingent Recoveries Claims related to receivables and payables and litigation. Intercompany Claims Reinstated. Did not receive any distributions under the plan of reorganization. Pension Claims/Motions Not available. Postpetition Interest? No If Yes, Recipient Class Not applicable. Concession Payments Yes Recipient and Comments Holders of senior subordinated notes claims received distributions in the form of 7.5% of the new common stock

as a result of the settlement with the creditors committee, with two-thirds going to the holders of the 11% senior subordinated notes and one-third going to holders of the 15% senior subordinated notes. In addition, holders of unsecured trade claims will receive payment in full in cash following execution of a qualified vendor support agreement.


Leveraged Finance


Chassix Inc. ($ Mil., Except Where Noted)

Issuer Profile Key Drivers of Bankruptcy Filing Fitch Industry Classification Industrial/Manufacturing Key Driver Flawed Business Model or Obsolete Product Subsector Auto Products Manufacturer

Key Driver Untenable Capital Structure

Prepetition Ticker Symbol Not Publicly Traded Financial Profile Petition Date Assets 833 Emergence Parent Company

Name/Ticker Chassix/Privately Held 12-Month Period Amount

Prepetition EBITDA 12/31/14 22

Post-Emergence EBITDA Forecast 12/31/16 128

Bankruptcy Summary Did All Entities in the Group File?a No

Enterprise Value (EV) Range (or Asset Value Range)b

Plan Proposed by Debtor

Low 450 Court District Southern District of New York

High 550

Substantive Consolidation No

Midpoint EV (Value) 500 Petition Date 3/12/15

Equity Value Range

Confirmation or Conversion Date 7/9/15

Low 233 Effective Date 7/29/15

High 313

Duration (Months) 4

Midpoint EV/Post-Emergence EBITDA Estimate (x) 3.9 Filing — Type Chapter 11 (Prearranged/Negotiated)

Petition Date Versus Emergence Date Section 363 Asset Sale by Debtor No Voluntary or Involuntary Filing Voluntary


Total Debt 680 217





Events Leading Up to Bankruptcy (or Contributing Factors) Chassix Inc. was formed in 2013 through the merger of two private-equity-owned auto suppliers, Diversified Machine and Concord International, and the new company had substantial debt. The predecessor companies were purchased by Platinum Equity in 2011 and 2012, respectively. The company’s production facilities required extensive upgrades and repairs. Repairs were ongoing when auto production levels spiked, which caused the production facilities to operate a close to maximum capacity. Production performance suffered while costs rose sharply, particularly at the Bristol facility, which became overwhelmed with problems. In addition, a number of legacy contracts with the original equipment manufacturers (OEMs) were underpriced, and the company began to experience a contraction in trade credit availability. The combined effects of these adverse factors were underperformance and a liquidity crisis. The company’s inability to make a $17.3 million interest payment due on Feb. 2, 2015 was a final driver of the filing.

Valuation Estimate Summary Going Concern Enterprise Valuation The third-party valuation advisor estimated a midpoint going concern enterprise valuation of $500 million. The valuation assumed that the management forecast of results would be achieved, which includes the EBITDA below. The advisor used several methodologies, including a discounted cash flow analysis, a publicly traded company analysis of the values of similar companies and a precedent transaction analysis of M&A valuations of peers. The specific discount rates, terminal value multiples and peer company identities were not provided.

($ Mil.) 2016 2017 2018 2019 EBITDA 128 119 119 116 Settlement The plan of reorganization was the result of extensive prefiling negotiations among Chassix, a majority of the holders of secured and unsecured notes, the company stock owner, Platinum Equity Advisors, and all of the largest customers, including Ford Motor Co., General Motors, FCA US (Chrysler Group), Nissan North America and BMW America. The restructuring support agreement embodied the plan debt restructuring terms and revisions to customer arrangements, and provided for an infusion of new capital. Key terms of the settlement included: a $50 million exit term loan provided by certain secured noteholders; conversion of $375 million of secured notes and $158 million of unsecured notes to common equity; OEM contract price increases of $45 million per year; new business programs, such as a right of first refusal on certain future programs and accommodations at the Bristol facility designed to fund losses there; a $250 million debtor in possession (DIP) facility that rolled up the prepetition ABL; and a term loan tranche funded by the secured noteholder.

Liquidation Value Alternative The Chapter 7 liquidation alternative valuation range of $324 million–$432 million was based on percentages of the book value of assets as of July 15, 2015. Under this scenario, the secured noteholders would have recovered in the range of 25%–54%, compared with approximately 67% under the plan of reorganization. Selected assets and percentages are as follows: • Accounts receivable of $149 million at 68%–82% • Inventory of $70 million at 65%–85% • Fixed and other assets of $286 million at 29%–45% aFiling excluded foreign subsidiaries. bDistributable value midpoint of $330 million, which reflects payment of DIP facilities and cash after accounting for normalization of trade credit terms less exit and administrative claims. Source, unless otherwise noted: Disclosure statement for second amended joint plan of reorganization dated April 24, 2015 and plan supplements.

Leveraged Finance


Chassix Inc. (Continued) Estimated Recoveries for Select Claims ($ Mil., Except Where Noted)





Secured Notes

Unsecured Notes

Subordinated Notes

New Equity

Options/ Warrants

DIP and Priority

$250 Million DIP Facility Consisting of a $150 Million Roll Up Revolver and $100 Million New Money Term Loan

155 100.0 RR1 — 155 — — — —

Secured $150 Million ABL Revolving Credit Facility

0 100.0 RR1 0 — — — — —

Secured 9 1/4% Secured Notes due 2018 395 67.3 RR3 — — — — 266 — Secured Capital Lease Obligations 12 100.0 RR1 — 12 — — — —

Unsecured 10%/10.75% Senior PIK Toggle Unsecured Notes due December 2018

158 7.0 RR6 4 — — — 7 —

Unsecured Trade Claims 32 38 RR4 12 — — — — — Equity Old Equity Interests Not

Applicable 0.0 RR6 — — — — — —

Estimated Claims 752

Recoveries 16 167 0 0 273 0



0 — — — — — — — —

Claim Seniority Claim Type Description DIP and Priority $250 million DIP facility consisting of a

$150 Million Roll Up Revolver and $100 Million New Money Term Loan

• The $55 million of DIP revolver claims $100 million of term loan claims were converted into exit facilities.

Secured $150 Million ABL Revolving Credit Facility

• The $135 million of petition date ABL borrowings were repaid in full in cash shortly following the filing date using proceeds of the DIP facility.

• Borrowing base calculated on percentages of value of accounts receivable and inventory. Secured 9 1/4% Secured Notes due 2018 • The secured notes were converted to new 97.5% of the new common equity.

• Recovery rate assumes midpoint fundamental value for new common equity. Secured Capital Lease Obligations • Reinstated.

• Secured by equipment and other property. Unsecured 10%/10.75% Senior PIK Toggle

Unsecured Notes due December 2018 • Distributions consisted of 2.5% of the new common stock (8% of the new common stock including

warrants with a five-year expiration period) and $4 million cash. Unsecured Trade Claims • Holders received a pro rata share of $12 million. Equity Old Equity Interests • No distributions. aA $50 million exit term loan was provided by certain prepetition noteholders. RR – Recovery Rating. DIP – Debtor in possession. ABL – Asset-based loan. Source, unless otherwise noted: Disclosure statement for second amended joint plan of reorganization dated April 24, 2015 and plan supplements.

Leveraged Finance


Chassix Inc. (Continued) Additional Information

Cash on Filing Date Not available. Prepetition Bank Facility Commitments $150 million ABL facility. Prepetition Bank Facility Borrowings on Filing Date Petition date borrowings of $135 million were repaid with proceeds of the DIP facility. Was the DIP a New Money Facility or Roll Up of a Prepetition Facility?

The $250 million DIP was partially a roll up of the $150 million prepetition ABL facility and partially a new money $100 million term loan provided by certain bondholders. The DIP was in turn rolled into exit facilities.

Other Notable Issues No Executory Contracts All intellectual property contracts, licenses, royalties and employee benefit program contracts were assumed. Deficiency Claims No Contingent Claims and/or Contingent Recoveries Disputed claims. Intercompany Claims No distributions under the plan. Pension Claims/Motions All material employee benefit and compensation plans were treated as assumed executory contracts and were

continued unaltered. Postpetition Interest? No If Yes, Recipient Class Not applicable. Concession Payments Yes Recipient and Comments Unsecured trade claims and unsecured note claims. The unsecured trade claimholders and the unsecured

noteholders each negotiated an additional $4 million cash distribution as per the plan supplement for the second amended plan of reorganization.

DIP – Debtor in possession. ABL – Asset-based loan. Source: Fitch Ratings, company disclosure statement dated April 24, 2015.

0

20

40

60

80

100

120(% of Par)

Data Source: Fitch Ratings, Bloomberg.

Bond Price History — Chassix Holdings($375 million 9.25% Senior Secured Notes due 2018)

Filing Date: 03/12/15

Confirmation Date: 07/09/15

Leveraged Finance


Colt Defense LLC ($ Mil., Except Where Noted)

Issuer Profile Key Drivers of Bankruptcy Filing Fitch Industry Classification Industrial/Manufacturing Key Driver Flawed Business Model or Obsolete Product Subsector Manufactures Firearms


Prepetition Ticker Symbol Privately Held Financial Profile Petition Date Assets 65

Emergence Parent Company Name/Ticker Colt Manufacturing LLC/Privately Held




Did All Entities in the Group File? No

Enterprise Value (EV) Range (or Asset Value Range)a Plan Proposed by Debtor

Low 175






Low (10)






Total Debt 357 186





Events Leading Up to Bankruptcy (or Contributing Factors) Colt’s revenues in 2014 were adversely affected by declines in demand for sporting rifles and handguns, as well as delays in sales to U.S. government and international sales for military use. These trends put pressure on cash flow and liquidity, and the company had to draw on its asset-based loan (ABL) facility to make a senior notes interest payment in November 2014 and as a result of tight liquidity was unable to produce enough rifles and handguns to meet market demand. Payments to suppliers were stretched to alleviate cash pressures. The company tried to improve its cash flow situation through pursuit of revenue growth across sales channels and operational restructuring efforts to optimize performance and improve costs and also tried to work closely with U.S. and foreign governments to obtain timely approval for sales. Colt launched an exchange offer in April, but was unable to close it. Creditors remained concerned about leverage, and a violation of a minimum LTM EBITDA covenant of $30 million was likely for the year ended Dec. 31, 2014. Moreover, there were potential supplier disruption lease extensions at the West Hartford, CT facility. The company was unable to reach a consensual restructuring with unsecured creditors, skipped the May 2015 bond interest payment, negotiated a restructuring support agreement and then filed for bankruptcy under Chapter 11 with the intention of selling all assets in a Section 363 sale.

Valuation Estimate Summary No Qualified Bid in Auction for Sale of All Assets Colt’s private equity sponsor, Sciens Capital Management LLC, agreed to act as stalking horse bidder to purchase all of Colt’s assets and assume secured liabilities and liabilities related to existing agreements with employees, customers, vendors and trade creditors. Colt aggressively marketed its assets during bankruptcy, and 20 potential bidders signed non-disclosure statements to complete their due diligence. Colt said that if the highest and best offer is made by a bidder that does not intend to assume the union contract, then Colt will ask the judge to reject the contract and approve the asset sale. However, no qualified bids were received, and the Oct. 26, 2015 auction was cancelled. Colt reserved the right to continue the sale effort and is at the same time pursuing a standalone reorganization as a going concern. The final outcome was a stand-alone going concern reorganization. Fundamental Enterprise Valuation Used In Standalone Going Concern Plan The third-party valuation advisor estimated a going concern enterprise value in the range of $175 million–$205 million, which includes $50 million of planned new money investment. Originally, the new money was to come from private equity owner Sciens Capital Management that was to receive a third-lien note and 83.25% of the new class A shares. Loan providers also received new class A shares. The advisor noted that absent the new money investment of $50 million, the reorganization value would be similar to the estimated liquidation value. Fitch notes that the final plan resulted in substantial leverage at emergence in January 2016, including first-, second-, third- and fourth-lien debt totaling $186 million and Sciens Capital invested less than $50 million of new money as had been contemplated, which delayed the emergence from bankruptcy. Instead, bondholders invested $30 million and Sciens invested $5 million, with the confirmation order noting an additional $10 million of new money investment to be obtained from Sciens by Feb. 9, 2016 in order for bondholders to release liens against Scien. The advisor relied on management’s projections of future results, which included the following EBITDA forecast:

($ Mil.) 2016 2017 2018 2019 EBITDA 21.6 33.7 30.7 $0.9 Liquidation Value Alternative

The liquidation alternative valuation estimated gross proceeds in the range of $68.9 million and $119.7 million. The analysis was based on balance sheet book values as of Aug. 15, 2015. The components included an estimated value of intellectual property in the range of $31.1 million–$72.7 million, equipment value of $13.5 million– $14.1 million and various other assets. aThis is a rough Fitch estimate. Colt reported $6 million of EBITDA for the six months ended June 30, 2014 in an 8-K filing on Feb. 9, 2015. bIncludes $50 million of new third-lien notes purchased by Sciens Capital Management LLC and other investors. Source, unless otherwise noted: Second amended disclosure statement dated Nov. 10, 2015.

Leveraged Finance


Colt Defense LLC (Continued) Estimated Recoveries for Select Claims ($ Mil., Except Where Noted)





Secured Notes

Unsecured Notes

Subordinated Notes

New Equity

Options/ Warrants

Secured DIP and Priority Claims 75 100.0 RR1 — 41 — — — — Secured Senior Loan Facility 0 100.0 RR1 — — — — — —

Secured Term Loan 68 100.0 RR1 — 68 — — — — Secured Other Secured Claims Not

Available 100.0 RR1 — — — — — —

Unsecured $250 Million 8.75% Senior Notes due 2017

261 4–15 RR6 — — — — 13 —

Unsecured Qualified Unsecured Trade Claims 2 100.0 RR1 — 2 — — — — Unsecured General Unsecured Claims 5 3.2 RR6 0 — — — — — Equity Equity Interests in Parent

Company Not

Available 0.0 RR6 — — — — — —




0 — — — — — — — —

Claim Seniority Claim Type Description Secured DIP and Priority claims • DIP facility claims, which included $41.7 million of senior DIP loans and $33.3 million of DIP loans, were repaid

with proceeds of the exit facilities. • Priority tax claims will receive deferred cash payments over a period not longer than five years from the

petition date, or on other terms agreed to by the holder. • Priority non-tax claims will be paid in cash.

Secured Senior Loan Facility • Petition date borrowings of $35 million were rolled up into the DIP facility. • Secured by a second lien on intellectual property and a first lien on all other assets of the borrower. • The initial closing date of this term loan was Feb. 9, 2015, and proceeds were used to refinance borrowings

under an ABL facility, which was terminated on that date. Secured Term Loan • $20 million of the $72.9 million petition date borrowings were rolled up into the DIP facility.

• All term loan claims will be repaid with the exit facilities. • Secured by a first lien on intellectual property and a second lien on all other assets.

Secured Other Secured Claims • Will be paid in full in cash or will receive the collateral securing such claim. Unsecured $250 Million 8.75% Senior Notes

due 2017 • Will receive new Class B stock units (subject to dilution on conversion of the Class A shares distributed to the

third-lien investors). Following conversion of the Class A shares, the ownership structure of the new company will be new investors of $50 million investment (62.44%), holders of 8.75% old notes (22.90%), management incentive plan (8.75%) and NPA Hartford (5.91%).

• The final allocation of new equity ownership under the modified new investment plan was not available as of case study publication.

Unsecured Qualified Unsecured Trade Claims • Will receive payment in full in cash. Unsecured General Unsecured Claims • Will receive a payment in kind 8% note that matures no earlier than six months later than the maturity date of

the exit facilities or general unsecured notes. • The new note will be subordinate to the exit facilities and the third-lien facility.

Equity Equity Interests in Parent Company

• Deemed to have rejected the plan. • No distributions.

RR – Recovery rating. DIP – Debtor in possession. ABL – Asset-based loan. Source, unless otherwise noted: Second amended disclosure statement dated Nov. 10, 2015.

Leveraged Finance


Colt Defense LLC (Continued) Additional Information

Cash on Filing Date Not available. $8.8 million as of July 6, 2015 as per monthly operating report. Prepetition Bank Facility Commitments $72.9 million term loan and $35 million senior loan. The senior loan was initiated in February 2015 to repay in full

borrowings under an ABL, which was terminated prior to the filing date. Prepetition Bank Facility Borrowings on Filing Date $72.9 million term loan $35 million senior loan. Was the DIP a New Money Facility or Roll Up of a Prepetition Facility?

The DIP was partially new money and partially a roll up of $35 million of senior loan borrowings.

Other Notable Issues Burdensome union contracts were a factor in this case. The International Automobile, Aerospace and Agricultural Workers of America and its Local Union No. 376 filed an appeal of bankruptcy court order approving bid procedures in connection with the sale of assets, as there was no requirement that the contract be assumed by the buyer of the assets. Ultimately, efforts to sell assets were scuttled and a standalone reorganization plan was pursued. The company reached a memorandum of understanding with United Auto union.

Executory Contracts The West Hartford, CT, manufacturing facility lease with NPA Hartford expired Oct. 25, 2015. Colt’s private equity owner, Sciens Capital Management LLC, is part owner of the West Hartford property, which complicated bankruptcy negotiations. A new lease was entered for the West Hartford, CT, facility.

Deficiency Claims None Contingent Claims and/or Contingent Recoveries Disputed claims. Intercompany Claims Reinstated in full or in part and paid in the ordinary course of business or cancelled and discharged, consistent with

the reorganized company’s business plan. These plans are unimpaired. Pension Claims/Motions The pension plans were continued unaltered during and after bankruptcy. Postpetition Interest? Yes If Yes, Recipient Class Secured Concession Payments Yes Recipient and Comments Unsecured notes.

DIP – Debtor in possession. ABL – Asset-based loan. Source: Fitch Ratings, company disclosure statement dated Nov. 10, 2015.

0102030405060708090

(% of Par)


Bond Price History — Colt Defense LLC($249 million 8.75% Senior Notes due 2017)


Confirmation Date: Not yet emerged .

Leveraged Finance


EaglePicher Holdings Inc. ($ Mil., Except Where Noted)

Issuer Profile Key Drivers of Bankruptcy Filing Fitch Industry Classification Industrial/Manufacturing Key Driver Flawed Business Model or Obsolete Product Subsector Manufactures Industrial Components for

Auto, Defense and Aerospace Applications


Financial Profile Prepetition Ticker Symbol Not Publicly Traded Petition Date Assets 599

Emergence Parent Company Name/Ticker

Eagle-Picher Corporation/Private






Low 476

Court District Ohio — Southern

High 476 Substantive Consolidation Certain Classes




Low 188




Filing — Type Chapter 11 Petition Date Versus Emergence Date Section 363 Asset Sale by Debtor Yes — Sale of Substantially All

Assets (as Going Concern) Voluntary or Involuntary Filing Voluntary


Total Debtc 503 288





Events Leading Up to Bankruptcy (or Contributing Factors) EaglePicher Holdings Inc. incurred significant losses during the two years prior to the Chapter 11 filing. Moreover, the company had significant debt and was highly leveraged. The financial results were adversely affected by industry-specific conditions, including: increased steel costs in the Hillsdale and Wolverine segments and costs associated with disruptions in the steel supply for the Wolverine segment; increasing mining, maintenance and energy costs in the filtration and mineral segment; and lower average selling prices, plant restructuring costs and China startup costs. The company had net losses in 2003 and 2004. These issues led to covenant violations and the reclassification of debt as current liabilities for the year ended Dec. 31, 2004, which in turn led to a going concern letter from auditors. Lenders declared all debt immediately due and payable and stopped advancing new loans.

Valuation Estimate Summary Going Concern Reorganization Value of Assets Transferred to Noteholders The disclosure statement included a third-party valuation that provided estimated value of assets and operations transferred to the new company, as follows:

Entity Value ($ Mil.) EaglePicher Inc. 161 Hillsdale Debtors 34

Filtration and Minerals 77 Technologies 192 Pharmaceutical Services 12

Total Value 476 The advisor relied on a comparable company analysis for companies in each of the operating business lines, a discounted cash flow analysis and a precedent transaction analysis. The assumptions and names of peers were not provided. The advisor also considered management’s financial projections, including the following EBITDA forecast:

($ Mil.) 2006 2007 2008 2009 EBITDA 52.5 65.3 70.5 75.4

Liquidation Value Alternative The Chapter 7 alternative liquidation analysis resulted in estimated recoveries in the range of $144 million–$212 million. The analysis was based on percentages of asset book value for each of the main debtor subsidiaries as of Oct. 31, 2005. Accounts receivable recovery rates, which varied by entity, were in the range of 50%–90% of book value. Inventory and PP&E recovery rates also varied by entity. aThe filing excluded affiliates outside the U.S. bSource of prepetition EBITDA is 10-K for year ended Dec. 31, 2004. cPetition date debt excludes borrowings under the $55 million accounts receivable securitization facility. Source, unless otherwise noted: Company disclosure statement dated Feb. 24, 2006.

Leveraged Finance


EaglePicher Holdings Inc. (Continued) Estimated Recoveries for Select Claims ($ Mil., Except Where Noted)





Secured Notes

Unsecured Notes

Subordinated Notes

New Equity

Options/ Warrants

DIP and Priority Replacement DIP and Estimated Remaining Administrative and Priority

279 100.0 RR1 25 252 — — — —

Secured $275 Million Secured Revolving Credit and Term Loan

0 100.0 RR1 — — — — — —

Unsecured 9.75% Senior Unsecured Notes 253 71.1 RR2 — — — — 180 —

Unsecured Other Unsecured Claims Not

Available 0–46 Not Available — — — — — — Equity Preferred and Common Equity

Interests 0 0.0 RR6 — — — — — —




0 — — — — — — — —

Claim Seniority Claim Type Description DIP and Priority Replacement DIP and Estimated

Remaining Administrative and Priority • The initial $50 million DIP and the $252 million of borrowings under the $275 million prepetition secured

revolving credit and term loan facility were repaid with proceeds of the replacement DIP. • The replacement DIP was, in turn, refinanced by exit facilities.

Secured $275 Million Secured Revolving Credit and Term Loan

• Paid in full in cash prior to the disclosure statement date. • The $101 million of revolving loans and $150 million term loan outstanding on the petition date were repaid

in full with borrowings under the replacement DIP facilities. Unsecured 9.75% Senior Unsecured Notes • Notes were guaranteed and recovery rate is the sum of the estimated recoveries from each individual

guarantor. Unsecured Other Unsecured Claims • Recoveries varied by individual debtor: EPI 0%, EPT 45.7%, EPPHS 2.8%. EPFH 18.7%, Hillsdale 7.1%. Equity Preferred and Common Equity

Interests • Holders received no distributions.

DIP – Debtor in possession. Source, unless otherwise noted: Company disclosure statement dated Feb. 24, 2006.

Leveraged Finance


EaglePicher Holdings Inc. (Continued) Additional Information

Cash on Filing Date Not available Prepetition Bank Facility Commitments $125 million revolving credit facility and $150 million term loan (original amount). In addition there was a $55 million

accounts receivable subsidiary that was a non-debtor.

Prepetition Bank Facility Borrowings on Filing Date Total credit facility borrowings of $251.3 million. $101.3 million drawn under $125 million revolver and $150 million term loan.

Was the DIP a New Money Facility or Roll Up of a Prepetition Facility?

The DIPs were partially new money and partially a roll up of prepetition bank debt. As initial $50 million DIP was refinanced by replacement DIP facilities consisting of a $230 million first-lien facility, a $65 million second-lien DIP and a $50 million third-lien DIP. The senior and junior DIPs were used to repay in full the prepetition bank debt and the initial DIP.

Other Notable Issues — Executory Contracts Approximately 50% of the 3,100 employees were union employees. The collective bargaining agreements with auto

workers, steel workers and teamsters were assumed and assigned to the Newco. Deficiency Claims None. Secured lenders were paid in full. Contingent Claims and/or Contingent Recoveries Certain asbestos claims that remained outstanding from EaglePicher’s prior 1991 bankruptcy filing will be settled by

reserves set aside in that case and resolved by the court in the first case. Contingent recoveries include estate cause of action recoveries.

Intercompany Claims — Pension Claims/Motions None. EaglePicher continued to make minimum funding contributions to two defined benefit pension plans as well

as make payments to other benefit plans. Postpetition Interest? — If Yes, Recipient Class Not available. Concession Payments None Recipient and Comments Not available.

DIP – Debtor in possession. Source: Fitch Ratings, company disclosure statement dated Feb. 24, 2006.

Leveraged Finance


Exide Technologies ($ Mil., Except Where Noted)

Issuer Profile Key Drivers of Bankruptcy Filing Fitch Industry Classification Industrial/Manufacturing Key Driver Resolve Legacy Liabilities Subsector Lead Acid Battery Producer for

Transportation and Industrial Applications Key Driver Flawed Business Model or Obsolete Product

Financial Profile Prepetition Ticker Symbol XIDE Petition Date Assets 2,195

12-Month Period Amount Emergence Parent Company Name/Ticker Exide Technologies/Privately Held


Bankruptcy Summary Post-Emergence EBITDA Forecastb 3/31/16 102


Enterprise Value (EV) Range (or Asset Value Range)c Plan Proposed by Debtor

Low 643






Low 22






Total Debt 1,000 621



Debt Shed in Bankruptcy

379

Debt Shed in Bankruptcy (%)

38

Events Leading Up to Bankruptcy (or Contributing Factors) Exide Technologies cited rising production costs, resulting in compressed margins, intense competition, exposure to the European market (51% of revenues) and constrained liquidity as reasons for the bankruptcy filing. The higher production costs resulted from increases in higher spent-battery costs and lead-related price increases resulting from the closure of the Vernon, CA lead recycling facility, which was as significant internal source of lead. The Vernon facility stopped supplying lead because of a suspension of operation order from the California Department of Toxic Substances Control (CDTSC) for noncompliance with state storm water requirements and applicable CDTSC health standards The Vernon facility supplied approximately 30% of U.S. lead needs. Suppliers imposed pricing premiums that could not be passed through to customers and tightened credit terms. The company’s EBITDA declined to approximately $104 million for the fiscal year ended March 31, 2013, compared with $179 million for the prior year. Finally, the highly leveraged balance sheet limited the company’s ability to invest in the business and sustain the capital structure.

Valuation Estimate Summary Valuation Implied by Plan Transactions Including New Money Investment Via Rights Offering The company and its third-party valuation advisor believed that the $643.4 million valuation implied by the post-reorganization date capital structure is the best measure of the company’s value because a substantial capital infusion that enabled Exide to reorganize and the plan was a product of extensive negotiations. The enterprise valuation estimate includes the $175 million proceeds of the rights offering for the convertible second-lien notes, which are convertible into 48.1% of the new common equity. The valuation also considers $23.1 million of debt associated with non-debtor foreign affiliates and excess cash. The advisor relied on management’s financial forecast, which included the following EBITDA forecast: ($ Mil., FYE March 31) 2016 2017 2018 2019 EBITDA 101.7 163.6 197.6 221.5

Liquidation Value Alternative The liquidation alternative valuation analysis estimated net total asset liquidation proceeds in the range of $378.3 million–$456.5 million. This would have resulted in 0% recovery for all secured and unsecured claims. The liquidation scenario included value from the European affiliates in the range of $163 million–$196 million and was otherwise based on percentages of the book value of assets. Assets and book value percentages included: • Cash of $11.2 million at 100% • Accounts receivable of $119.9 million at 82.1%–91.9% • Inventory of $189.7 million at 35%–46.7% • PP&E of $243.2 million at 10.1% to 17.8% aInternational operations are excluded from the filing. bPro forma for adjustments totaling $15 million related to the Vernon facility costs and U.S. Department of Justice investigation. cThe valuation estimate includes $175 million from the rights offering for the convertible second-lien notes, which are convertible into 48.1% of the new common equity as new equity. Source, unless otherwise noted: Second amended company disclosure statement dated Feb. 4, 2015, fourth amended plan of reorganization and supplements dated March 27, 2015.

Leveraged Finance


Exide Technologies (Continued) Estimated Recoveries for Select Claims ($ Mil., Except Where Noted)





Secured Notes

Unsecured Notes

Subordinated Notes

New Equity

Options/ Warrants

DIP and Priority $200 Million DIP ABL Claims 102 100.0 RR1 102 — — — — — DIP and Priority $246 Million DIP Term Loan 347 100.0 RR1 — 347 — — — — Secured Prepetition ABL due 2016 0 100.0 RR1 — — — — — —

Secured $675 Million 8.75% Secured Notes due February 2018

696 5.2 RR6 — — — — 36 —

Unsecured General Unsecured Claims 104 < 5 RR6 — — — — — — Unsecured Vernon Tort Claims 3,293 < 5 RR6 — — — — — —

Subordinated

Subordinated Convertible Floating Rate Notes due September 2013

52 0.0 RR6 — — — — — —

Equity Interests in Exide Not Available 0.0 RR6 — — — — — —

Estimated Claims 4,594

Recoveries 102 347 0 0 36 0



23 — — — — — — — —

Claim Seniority Claim Type Description DIP and Priority $200 Million DIP ABL Claims • Paid in cash through the exit ABL revolver facility. DIP and Priority $246 Million DIP Term Loan • The $246.8 million of DIP term loans were exchanged for $259.1 million of new first-lien high-yield notes and

up to $100 million new second-lien convertible notes allocated to certain consenting creditors. • Holders of 8.75% notes were entitled to invest up to an additional $346.8 million to purchase these DIP term

loans at par. Secured Prepetition ABL due 2016 • Petition date borrowings and letters of credit of approximately $160 million on the petition date were paid in full

with proceeds from the DIP facility shortly thereafter. • Secured by accounts receivable and inventory. • Borrowings limited to the lesser of the $210 million facility commitment or the maximum allowed under the

borrowing base consisting of 85% of accounts receivable and 85% of eligible inventory. Secured $675 Million 8.75% Secured

Notes due February 2018 • Holders received 10% of the new common stock, the right to participate in the rights offering and the DIP term

loan refinancing option, plus a share of the general unsecured creditor (GUC) trust value from their senior notes deficiency claim.

• The 5.2% recovery rate pertains only to the 10% of new common stock distribution and excludes any value from rights offerings or GUC trust.

• The GUC trust was initially seeded with $3 million of funding and would also make distributions with any value from monetization of intellectual property, recoveries from causes of action related to potential lead price manipulation and other sources.

• The senior secured notes were secured by a first priority lien on existing and after acquired equipment, stock in subsidiaries including 65% of Exide CV’s stock, intercompany loans, certain real estate and a second lien on ABL facility collateral.

• Holders agreed to backstop $160 million of the $175 million rights offering for new second-lien notes that are convertible into 48.1% of the new common equity. This is a new money investment.

Unsecured General Unsecured Claims • Contingent recoveries only from a share of the GUC trust. • Claims primarily consisted of outstanding payments under various contracts and other arrangements for goods

and services supporting operations. Unsecured Vernon Tort Claims • Contingent recoveries from the Vernon tort claims trust.

• If holders voted to accept the plan, they received their pro rata share of distributions from the trust. Subordinated Subordinated Convertible

Floating Rate Notes due September 2013

• Contingent recoveries only. • Were to be convertible into common stock on maturity date.

Equity Equity Interests • No distributions under the plan. • Deemed to have rejected the plan.

RR – Recovery Rating. DIP – Debtor in possession. ABL – Asset-based loan. Source, unless otherwise noted: Second amended company disclosure statement dated Feb. 4, 2015, fourth amended plan of reorganization and supplements dated March 27, 2015.

Leveraged Finance


Exide Technologies (Continued) Additional Information

Cash on Filing Date Not available. Prepetition Bank Facility Commitments Borrowing base available under $210 million ABL facility as of the petition date was not provided. Prepetition Bank Facility Borrowings on Filing Date There was $113 million of loans and $47 million of letters of credit outstanding under the ABL facility. Was the DIP a New Money Facility or Roll Up of a Prepetition Facility?

The $500 million DIP, consisting of a $225 million first-out ABL revolver and $275 million second-out term loan, was partially a roll up of the prepetition $160 million ABL facility borrowings and letters of credit and partially a new money facility. The DIP facility was subsequently upsized by $60 million to provide additional liquidity and the maturity date extended to Dec. 31, 2014, and other terms were modified.

Other Notable Issues Environmental remediation costs, disputes and related stipulations with various environmental regulatory commissions and agencies were present in the Exide case. Tort claims related to the Vernon, CA facility totaled $3.293 billion. A trust was set up to make distributions to the Vernon claimants.

Executory Contracts Several unprofitable contracts with Toyota Motor Engineering & Manufacturing North America, Chrysler Group LLC and Nissan North America, Inc. were rejected at the outset of the case. As of the disclosure statement date, the company continued to evaluate other executory contracts. The contract with the United Steel Workers was extended during the bankruptcy to Feb. 22, 2015 from Feb. 23, 2014, keeping most of the terms unchanged and providing a slight raise. Other collective bargaining agreements were also assumed.

Deficiency Claims Yes, 8.625% secured noteholders received a pro rata share of the GUC trust assets. Contingent Claims and/or Contingent Recoveries Yes, contingent recoveries related to sale of IP and causes of action. Contingent claims related to Vernon facility. Intercompany Claims $4 million of intercompany claims will be reinstated, released, waived, discharged, treated as dividend,

contributed as capital or exchanged for equity of a subsidiary of the debtor. Pension Claims/Motions The pension plan was assumed and continued. Postpetition Interest? No If Yes, Recipient Class Not applicable. Concession Payments Not available. Recipient and Comments Not available.

DIP – Debtor in possession. ABL – Asset-based loan. Source: Fitch Ratings, company disclosure statement dated March 27, 2015.

0102030405060708090

100

(% of Par)


Bond Price History — Exide Technologies($674 million 8.625% Senior Secured Notes due 2018)



Leveraged Finance


Fedders Corporation ($ Mil., Except Where Noted)

Issuer Profile Key Drivers of Bankruptcy Filing Fitch Industry Classification Industrial/Manufacturing Key Driver Deep Cyclical Trough Subsector Air Conditioning and Warm Air Heating Equipment

Key Driver Flawed Business Model or Obsolete Product

Prepetition Ticker Symbol FJC Financial Profile Petition Date Assets 181 Emergence Parent Company

Name/Ticker FNA Liquidating, Inc./Not Applicable — Liquidated 12-Month Period Amount


Bankruptcy Summary Post-Emergence EBITDA Forecast Not Applicable Liquidated


Enterprise Value (EV) Range (or Asset Value Range) Plan Proposed by Joint Plan of Debtor and Creditor

Low 68






Low 0



Midpoint EV/Post-Emergence EBITDA Estimate Not Applicable

Filing — Type Chapter 11 Petition Date Versus Emergence Date Section 363 Asset Sale by Debtor Yes — Sale of Substantially All Assets

(as Liquidation) Voluntary or Involuntary Filing Voluntary


Total Debt 221 0

Resolution Liquidation (Under Chapter 11)

Consolidated Leverage (x) (15.8) Not Applicable


221


100

Events Leading Up to Bankruptcy (or Contributing Factors) In the decade prior to the filing date, Fedders Corporation transitioned its market focus from primarily room air conditioners for the residential market to central air conditioners, furnaces and air cleaners for residential customers as well as to the commercial and industrial air conditioning market in an effort to improve profits and pursue growth markets. To accomplish this transition, a series of acquisitions and divestitures were made between 1999 and 2005. As part of this strategy, the company stopped selling room air conditioners and dehumidifiers to its two largest customers, Walmart and Home Depot in an effort to improve margins and improve working capital. Together, these two retailers accounted for 60% of Fedders’ residential room air conditioner sales. While some drop in revenues was expected from the market transition strategy, the decrease in revenues and cash flow was larger than anticipated. In addition, changes to government energy efficiency mandates caused 2006 sales to decrease, then the residential construction market slowdown in 2007 and a warmer than normal winter further reduced sales. Liquidity became strained and the company violated minimum EBITDA covenants under the revolver and term loan.

Valuation Estimate Summary Proceeds from Piecemeal Sale of Assets Determined Value Bidding and sales procedures were put in place to facilitate the sale of the businesses and liquidation of other assets. The sum of the proceeds and the unsecured recovery rate were used to make a rough estimate of the company’s value. Asset Sales Price ($ Mil.)

Eubank Coil and Related Real Property 3.2 U.S. Residential Business 13.3

Indoor Air Quality Business 25.0

Fedders Addison 14.4 IslandAire (Setauket, NY Operations) 7.9 China Tooling and R&D 4.0

Sum of Proceeds 67.8 The plan incorporated a negotiated settlement among the company, term lenders, and creditors committee that ensured certain funds would be provided to the general unsecured creditors trust for distribution to these claims. The sum above excludes remaining unliquidated assets and approximately $5 million of assets in a supplemental “top hat” retirement plan for executives that was terminated. The appendix listing of unliquidated residual assets was not available.

Liquidation Value Alternative A Chapter 7 liquidation scenario valuation was not completed. The disclosure statement noted that the plan met the best interests test because under the negotiated plan, the term lenders made a $1.8 million contribution to the general unsecured creditors trust, and this trust would also receive any payments from causes of action, and under a Chapter 7 the holders of unsecured claims would recover $0. aFiling excluded foreign affiliates. Source, unless otherwise noted: First amended disclosure statement for the debtors’ and term lenders’ joint plan of liquidation as modified July 14, 2008.

Leveraged Finance


Fedders Corporation (Continued) Estimated Recoveries for Select Claims ($ Mil., Except Where Noted)





Secured Notes

Unsecured Notes

Subordinated Notes

New Equity

Options/ Warrants

DIP and Priority Administrative and DIP 43 100.0 RR1 43 — — — — —

Secured $22 Million of Loans Under $40 Million Revolving Credit Facility

0 100.0 RR1 — — — — — —

Secured Secured Term Loan 46 52.5 RR3 24 — — — — — Unsecured 9.875% Senior Notes due 2014 155 <2 RR6 2 — — — — — Unsecured Trade Debt 11 <2 RR6 1 — — — — — Equity Equity Interests 0 0.0 RR6 — — — — — —




0 — — — — — — — —

Claim Seniority Claim Type Description DIP and Priority Administrative

and DIP • Paid in full in cash. • $22 million prepetition revolver borrowings were rolled into the $33 million DIP. • Amount is Fitch estimate

Secured $22 Million of Loans Under $40 Million Revolving Credit Facility

• $22 million of petition date revolver borrowings were paid in full with proceeds of the DIP. • Lenders were paid in full in cash shortly after the filing date so there were $0 claims. • Secured by a first lien on working capital assets and a second lien on fixed assets.

Secured Secured Term Loan • Secured by a first lien on fixed assets and a second lien on working capital assets. Unsecured 9.875% Senior Notes due 2014 • Holders received their pro rata share of the beneficial interests in the general unsecured claims liquidating

trust. • Recoveries depended primarily on proceeds from lawsuits and avoidance actions as well as a $1.8 million

contribution by the term loan lenders. • The recovery rate is a Fitch estimate and was not provided in the disclosure statement.

Unsecured Trade Debt • Holders received their pro rata share of the beneficial interests in the general unsecured claims liquidating trust.

• Recoveries depended primarily on proceeds from lawsuits and avoidance actions as well as a $1.8 million contribution by the term loan lenders.

• The recovery rate is a Fitch estimate and was not provided in the disclosure statement. • Non-debtor affiliates also had trade debt of approximately $40 million.

Equity Equity Interests • No distributions. • Deemed to have rejected the plan.

DIP – Debtor in possession. Source, unless otherwise noted: First amended disclosure statement for the debtors’ and term lenders’ joint plan of liquidation as modified July 14, 2008.

Leveraged Finance


Fedders Corporation (Continued) Additional Information

Cash on Filing Date Approximately $3 million per 8-K filing of the monthly operating report for the stub period 8/22/07–8/27/07. Prepetition Bank Facility Commitments $40 million revolving credit facility and $46 million term loan. Prepetition Bank Facility Borrowings on Filing Date $22 million of borrowings under the $40 million revolver and the $46 million term loan. Was the DIP a New Money Facility or Roll Up of a Prepetition Facility?

The $33 million DIP was partially used to roll up the $22 million of prepetition revolver borrowings and partially a new money facility.

Other Notable Issues None Executory Contracts 1,200 service agreements with providers of warranty services, certain executive employment contracts, a

licensing agreement with Maytag, and real estate leases in NM and NJ were rejected. Deficiency Claims Waived in settlement. Contingent Claims and/or Contingent Recoveries Contingent recoveries from a lawsuit and avoidance actions Intercompany Claims Intercompany clams of the affiliated China entities of $1.7 million were paid as these were considered essential

suppliers Pension Claims/Motions The company and plan administrator shall continue to pay retiree benefits. All but three employees were paid

severance benefits. Postpetition Interest? Not available. If Yes, Recipient Class If yes, recipient class. Concession Payments Yes Recipient and Comments General unsecured claims. A trust was established and funded for the benefit of unsecured claimholders.

DIP – Debtor in possession. Source: Fitch Ratings, company disclosure statement dated July 14, 2008.

Leveraged Finance


Global Power Equipment Group Inc. ($ Mil., Except Where Noted)

Issuer Profile


Fitch Industry Classification Industrial/Manufacturing Key Driver Resolve Legacy Liabilities Subsector Manufactures Equipment for Power


Plants and Energy Sector Prepetition Ticker Symbol GEG

Financial Profile Petition Date Assets 381 Emergence Parent Company

Name/Ticker Global Power Equipment Group/GLPW (trading started in 2010)






Low 220


High 235 Substantive Consolidation Certain Classes




Low 72



Midpoint EV/Post-Emergence EBITDA Estimate 9.9

Filing — Type Chapter 11 Petition Date Versus Emergence Date Section 363 Asset Sale by Debtor Yes — Partial Sale of Assets Voluntary or Involuntary Filing Voluntary


Total Debtc 112 150

Resolution Emerged/Reorganized (Public)


Debt Shed in Bankruptcy — (38)

Debt Shed in Bankruptcy (%) — (34)

Events Leading Up to Bankruptcy (or Contributing Factors) The filing was made as a result of a poorly performing heat recovery steam generator (HRSG) business at the Deltak Group business unit and the existence of unprofitable fixed price HRSG construction contract commitments at the Deltak Group unit. Increases in the cost of steel, labor and other items led to existing and anticipated losses under these contracts. The filing was done to address the ongoing cash drain from the HRSG business and restructuring the balance sheet. The Deltak Group posted net losses of $36.8 million between Jan. 1, 2005 and the filing date. Other triggering issues included a $7 million overstatement of gross profit for two projects in China that led to a restatement in early 2006. The company became unable to draw upon its credit facility due to an inability to file a timely 2005 10-K report, and certain holders of the subordinated notes also notified the company that the restatement caused a default. The company sought to refinance the credit facility and notes, but was unable to do so as a result of the ongoing losses at Deltak. After the filing, the company normally operated its two profitable operations, Williams Industrial and Braden Manufacturing, as well as Deltak’s boiler business, and initiated an orderly wind down of the Deltak HRSG operations. Each of the three business units were treated as separate debtor groups under the plan of reorganization and continued normally, except for the Deltak HRSG operations, which were wound down.

Valuation Estimate Summary Going Concern Enterprise Valuation Based on Settlement The plan was premised on a going concern total enterprise value for the new company of $220 million, exclusive of the proceeds of asset sales and excess cash. The sale of the DPEC assets in Asia was approved by the court and closed on Oct. 17, 2007. The company received approximately $15.5 million for this sale. There was no fundamental valuation provided to support the settlement value. The plan was the result of a negotiated settlement that included a rights offering available to prepetition equity holders for a private placement of $71 million supported by a backstop stock purchase agreement and also included $150 million of new exit financing. The proceeds were used to fund cash distributions to creditors under the plan. The parties to the settlement were the debtors, its equity committee, creditors committee and noteholders. The unsecured creditors at Deltak for claims relating to HSRG units under rejected contracts objected to the plan since they were impaired but old equity holders received a portion of the new equity but the plan was confirmed. The disclosure statement included management financial projections, including the following EBITDA forecast: ($ Mil.) 2008 2009 2010 2011 EBITDA 33.1 23.1 24.8 28.6

Liquidation Value Alternative The Chapter 7 alternative valuation analysis estimated a range of gross proceeds less wind-down costs of $40.8 million–$56.6 million. With secured claims of $53.1 million, assuming all letters of credit are drawn, and administrative claims of $28.2 million–$33.4 million, there would be insufficient value to pay secured creditors in full under this scenario. The analysis was based on percentages of asset book value and included: • Cash of $17.7 million at 100% • Accounts receivable of $55.1 million at 11%–17% • Net PP&E of $8.4 million at 39%–49% • DPEC asset sale for proceeds of $10 million–$14.4 million aThe company’s foreign subsidiaries in Asia, Europe and Mexico were excluded. bNo 2006 financial statements were available due to an inability to file a 10-K. cPetition date debt includes $23 million of undrawn letters of credit. Source, unless otherwise noted: First amended disclosure statement for the first amended joint Chapter 11 plan of reorganization dated Oct. 30, 2007.

Leveraged Finance


Global Power Equipment Group Inc. (Continued) Estimated Recoveries for Select Claims ($ Mil., Except Where Noted)





Secured Notes

Unsecured Notes

Subordinated Notes

New Equity

Options/ Warrants

DIP and Priority DIP, Administrative and Priority 49 100.0 RR1 49 — — — — —

Secured Prepetition Revolver and Term Loan Claims

0 100.0 RR1 — — — — — —

Secured GPEG Debtor Secured Claims 2 100.0 RR1 2 — — — — — Unsecured GPEG Debtor Unsecured Claims 11 100.0 RR1 11 — — — — — Subordinated 4.25% Convertible Subordinated

Notes due 2011 Claims 89a 96.6 RR1 86 — — — — —

Unsecured Braden Debtor Group Unsecured Claims

4 100.0 RR1 4 — — — — —

Secured Deltak Debtor Group Secured Claims 2 100.0 RR6 2 — — — — —

Unsecured Deltak Debtor Group Unsecured Claims

Range of 25 to 247

Not Available Not Available 34 — — — — —

Equity Equity interests Not Available Not Available Not Available — — — — 40 —




Not Available — — — — — — — —

Claim Seniority Claim Type Description DIP and Priority DIP, Administrative and Priority • Paid in full in cash.

• Included $27 million of consolidated administrative claims (inclusive of DIP), $15 million of GPEG debtor group priority claims and $7 million of Williams debtor group priority claims.

Secured Prepetition Revolver and Term Loan Claims

• Paid in full in cash with proceeds from the DIP financing shortly after the filing date. • Petition date usage under the facility, including undrawn letters of credit, was approximately $42.6 million. • The facility was secured by first liens on substantially all assets, including approximately $8.5 million of

restricted cash pledged to the lenders. Secured GPEG Debtor Secured Claims • Holders either retained their liens and received deferred cash payments equal to their claim amount or

received their collateral or the indubitable equivalent to satisfy their claim. Unsecured GPEG Debtor Unsecured Claims • Paid in full in cash including postpetition interest. Subordinated 4.25% Convertible Subordinated

Notes due 2011 Claims • $86 million of cash payments paid to holders as a result of a settlement with this class, which includes

principal of approximately $69 million and certain postpetition interest, redemption premium, liquidated damages and other cost amounts.

• The compromise treatment reached reflects roughly a midpoint between the principal amount of the note claims plus unpaid prepetition interest and nondefault rate postpetition interest, and the full claim amounts sought by the noteholders.

• These notes were guaranteed by the three debtor groups, and claims were accordingly made against all three of them.

Unsecured Braden Debtor Group Unsecured Claims

• Paid in full in cash including postpetition interest.

Secured Deltak Debtor Group Secured Claims • Holders either retained their liens and received deferred cash payments equal to their claim amount or received their collateral or the indubitable equivalent to satisfy their claim.

Unsecured Deltak Debtor Group Unsecured Claims

• Holders received their pro rata share of a $34 million fund set aside to pay eventual claims (or $30 million under an alternative settlement).

• Cash distributions. • There were claims from contract counterparties for rejected construction contracts. The total claims (and

recovery rate) is not available because the amounts would change based on the percentage of work completed under the various contracts. Counterparties asserted $247 million of claims, but the company believed the best case estimate of claims was $25.9 million assuming projected resolutions and stepdowns occurred.

Equity Equity Interests • The prepetition equity holders received one share of new common stock for each share of prepetition common stock and a right to purchase additional shares of new common stock pursuant to a rights offering made Nov. 6, 2007.

• In exchange for old stock, 5,266,885 shares of new common stock to prepetition equity holders. In addition, 9,589,138 shares of new common stock were issued in exchange for $72.5 million in new capital. The price of the common stock in the rights offering was $7.65 per share.

aThis is the negotiated allowed claim amount per a settlement. RR – Recovery Rating. DIP – Debtor in possession. Source, unless otherwise noted: First amended disclosure statement for the first amended joint Chapter 11 plan of reorganization dated Oct. 30, 2007.

Leveraged Finance


Global Power Equipment Group Inc. (Continued) Additional Information

Cash on Filing Date $15 million of unrestricted cash and $8 million of restricted cash that was pledged to the credit facility lenders. Prepetition Bank Facility Commitments $60 million revolver (reduced from $75 million prior to filing date) and $25 million term loan. Prepetition Bank Facility Borrowings on Filing Date There was $15.1 million outstanding under the term loan and $3.9 million drawn under the revolver for

borrowings in China. In addition, there were letters of credit totaling $23.6 million issued and outstanding under the facility, but there had been no drawings under these letters of credit.


The $85 million DIP facility was partially used to refinance the prepetition revolver and term loan debt and also used to facilitate bonding requirements and provide additional liquidity.

Other Notable Issues There were several controversial issues, including the value of the Deltak assets, the allocation of reorganization costs, intercompany settlements, and the noteholder compromise

Executory Contracts Deltak rejected burdensome fixed-price HRSG contracts as part of the wind down of this business and rejected office contracts in Brazil and Italy. Some of these counterparties objected to the plan since their claims were impaired but equity holders received distributions of some of the new shares and due to the treatment of intercompany funds due to Deltak from affiliates that were not included as Deltak assets. The headquarters lease in Tulsa, OK was amended and then assumed.

Deficiency Claims None. Secured claims were paid in full. Contingent Claims and/or Contingent Recoveries There were disputes regarding Deltak’s value and cost allocations. Intercompany Claims The intercompany claims between Deltak and the other debtors were resolved via a settlement. Pension Claims/Motions Plans were continued. Postpetition Interest? Yes If Yes, Recipient Class Unsecured claims. Concession Payments Yes Recipient and Comments Equityholders, as the unsecured Deltak contract counterparty claims were not paid in full. However, there were

disputes regarding the allocation of administrative costs and other claims, so the existence of a concession allocation is debatable.

DIP – Debtor in possession. Source: Fitch Ratings, company disclosure statement dated Oct. 30, 2007.

Leveraged Finance


International Aluminum Corp. ($ Mil., Except Where Noted)

Issuer Profile Key Drivers of Bankruptcy Filing Fitch Industry Classification Insurance Key Driver Deep Cyclical Trough Subsector Manufacturer of Aluminum and Vinyl


Building Products Financial Profile Prepetition Ticker Symbol — Petition Date Assets 210

12-Month Period Amount Emergence Parent Company Name/Ticker

International Architectural Group/ Privately Held

Prepetition EBITDAa 6/30/06 31


Bankruptcy Summary Did All Entities in the Group File? Yes



Low 76 Court District Delaware

High 88

Substantive Consolidation Yes


Equity Value Range



High 18

Duration (Months) 4

Midpoint EV/Post-Emergence EBITDA Estimate (x) 54.7 Filing — Type Chapter 11 (Prearranged/Negotiated)

Petition Date Versus Emergence Date Section 363 Asset Sale by Debtor No Voluntary or Involuntary Filing Voluntary


Total Debtb 164 38





Events Leading Up to Bankruptcy (or Contributing Factors) The commercial and residential building sector was adversely affected by the overall economic slowdown in the U.S., and a lack of credit available to the company’s customers. The 2009 residential housing market was very weak, with decreases in new home orders, an excess inventory of existing homes and a growing wave of foreclosures. In addition, commercial and residential remodeling demand also decreased starting in the fourth quarter of 2008, with weakness continuing in 2009. These factors led management to scale back operations, freeze wages, negotiate lower materials pricing and pursue other cost savings. However, despite these efforts, there was a breach of the total leverage ratio under the credit agreement and the subordinated loan agreement. The company ceased making interest payments on the subordinated loan in March 2009. Negotiations with senior lenders were initiated, which led to a restructuring support agreement and the prearranged plan of reorganization to convert the senior debt to the new equity.

Valuation Estimate Summary Valuation Based on Credit Agreement Claim recovery Rate The disclosure statement indicated a recovery rate of 64%–74% for holders of secured credit agreement claims. Based on borrowings of approximately $118.8 million, this implies a distributable value of approximately $76 million–$88 million. However, the company remained overleveraged relative to the depressed EBITDA at the time of reorganization. The fundamental valuation advisor estimate was lower (see below).

Fundamental Going Concern Enterprise Valuation The third-party valuation advisor estimated a going concern enterprise valuation in the range of $34 million–$46 million, with an assumed plan effective date of March 31, 2010. The advisor relied on several valuation methodologies, including a discounted cash flow analysis, precedent transaction and peer comparable market valuation analysis. The assumptions and names of peers and transactions were not provided. The advisor considered management’s financial projections included in the disclosure statement dated Jan. 4, 2010, which included the following EBITDA forecast: ($ Mil., FYE June 30) 2010 2011 2012 2013 2014 Adjusted EBITDA (0.8) 1.4 5.6 11.4 15.9

Prior Acquisition Value for Reference While not a bankruptcy enterprise valuation related to this case study, the August 16, 2006 acquisition value of the company provides another recent valuation estimate (prerecession and indicative of a peak valuation). The company was sold by public shareholders to an investor group for total consideration of $228.4 million. This provides a useful data point to illustrate the large peak-to-trough valuation swings in the cyclical building products sector. Liquidation Value Alternative The liquidation analysis estimated gross proceeds of $27.9 million–$41.4 million under a Chapter 7 plan. Fitch notes that the new company, International Architectural Group, filed a second bankruptcy (Chapter 7) in 2011 and liquidated. aSourced from FY 2006 10-K, which was the final year that an annual filing was available due to the going-private transaction in August 2006. Projections indicated slightly negative EBITDA expected for FYE June 2010. bPetition date debt excludes approximately $60 million of sale/leaseback obligations. Source, unless otherwise noted: Disclosure statement relating to the joint plan of reorganization dated Feb. 12, 2010.

Leveraged Finance


International Aluminum Corp. (Continued) Estimated Recoveries for Select Claims ($ Mil., Except Where Noted)





Secured Notes

Unsecured Notes

Subordinated Notes

New Equity

Options/Warrants

DIP and Priority Administrative and Priority Not Available 100.0 RR1 — — — — — —

Secured $145 Million Credit Facility due March 30, 2013 119 64–74 RR3 20 38 — — 18 —

Secured Other Secured Not Available 100.0 RR1 — — — — — —

Unsecured $45 Million12.75% Senior Subordinated Mezzanine Loan 45 0.0 RR6 — — — — — —

Unsecured General Unsecured Not Available 100.0 RR1 — — — — — —

Intercompany Intercompany Not Available 100.0 RR1 — — — — — —

Equity Equity Interests in IAC Holdings Not Available 0.0 RR6 — — — — — —




0 — — — — — — — —

Claim Seniority Claim Type Description DIP and Priority Administrative and Priority • Paid in full in cash.

• The initial disclosure statement indicated collective amount of priority tax and nontax claims and general unsecured claims of approximately $15 million were already paid as of the disclosure statement date, or had been allowed as claims.

• There was no DIP facility. Secured $145 Million Credit Facility due

March 30, 2013 • Claimholders received their share of excess cash (in excess of $20 million, final amount of cash not

known), new term notes and 100% of the new equity less any new equity distributed to management under the management incentive plan.

• The $118.8 million claim amount is principal only. Holders also made claims for accrued and unpaid prepetition interest at the nondefault rate.

• Original commitment consisted of a $125 million term loan and a $20 million revolving loan facility. Secured Other Secured • Holders had their claims reinstated and were to be paid in the ordinary course of business or by transfer

of collateral. Unsecured $45 Million12.75% Senior Subordinated

Mezzanine Loan • Terminated and cancelled with no distributions. • Deemed to have rejected the plan of reorganization.

Unsecured General Unsecured • Unimpaired. • Holders of trade and general unsecured claims were paid on the plan effective date, or in the ordinary

course of business, or as otherwise agreed to by the holder and the debtor. Intercompany Intercompany • Unimpaired.

• Reinstated to the extent deemed appropriate by the company, or adjusted, waived, continued or capitalized in whole or in part.

Equity Equity Interests in IAC Holdings • Deemed to have rejected the plan. • The old equity as held by Genstar Capital Partners IV, L.P. and certain of its affiliates.

RR – Recovery Rating. DIP – Debtor in possession. Source, unless otherwise noted: Disclosure statement relating to the joint plan of reorganization dated Feb. 12, 2010.

Leveraged Finance


International Aluminum Corp. (Continued) Additional Information

Cash on Filing Date Not available. Prepetition Bank Facility Commitments $20 million revolver borrowings and $98.8 million remaining debt under the $125 million term loan. Prepetition Bank Facility Borrowings on Filing Date $20 million revolver was fully drawn. Was the DIP a New Money Facility or Roll Up of a Prepetition Facility?

There was no DIP facility. The company used cash collateral for liquidity needs.

Other Notable Issues None noted. Executory Contracts Assumed contracts included employee benefit contracts, insurance programs and customer programs including

warranties and rebates, advertising, etc. Deficiency Claims None Contingent Claims and/or Contingent Recoveries Disputed claims. Intercompany Claims Unimpaired due to reinstatement or other treatment. Pension Claims/Motions All employee agreements were assumed. Postpetition Interest? No If Yes, Recipient Class Not applicable. Concession Payments Yes Recipient and Comments General unsecured trade claims were paid in full from a gift from the senior lenders.

DIP – Debtor in possession. Source: Fitch Ratings, company disclosure statement dated Feb. 12, 2007.

Leveraged Finance


Masonite Corporation ($ Mil., Except Where Noted)

Issuer Profile


Fitch Industry Classification Building and Materials

Key Driver Deep Cyclical Trough Subsector Door Manufacturing and Sales


Prepetition Ticker Symbol Privately Held Financial Profile Petition Date Assets 2,660 Emergence Parent Company

Name/Ticker New Masonite Holdings/MASWF 12-Month Period Amount



Enterprise Value (EV) Range (or Asset Value)

Did All Entities in the Group File?ª Yes

Low 500 Plan Proposed by Debtor

High 500


Midpoint EV 500 Substantive Consolidation No

Equity Value Range (including Cash on Hand)


Low 266 Confirmation or Conversion Date 5/29/09

High 266


Midpoint EV/Post-Emergence EBITDA Estimate (x) 8.2 Duration (Months) 2

Petition Date Versus Emergence Date Filing — Type Chapter 11 (Prepackaged) Section 363 Asset Sale by Debtor No

Petition Date Emergence Date Voluntary or Involuntary Filing Voluntary

Total Debt 2,200 300

Postconfirmation Liquidating Trust No

Consolidated Leverage (x) 13.5 4.9 Resolution Emerged/Reorganized (Public)

Debt Shed in Bankruptcy — 1,900


Events Leading Up to Bankruptcy (or Contributing Factors) Masonite became leveraged when it was purchased by affiliates of Kohlberg Kravis Roberts & Company in 2005 and the high debt became difficult to service during the housing downturn. As a manufacturer of interior and exterior doors, Masonite was adversely affected by the severe downturn in the U.S. housing and construction market that started in 2006 and intensified in 2007 and 2008. The downturn also affected Masonite’s international markets. There was a significant decline in demand for doors and door components. The reduced demand led to sales and cash flow declines. The company’s ability to service its heavy debt load became strained despite operational cost saving efforts that included shutting manufacturing facilities and reducing the workforce. Masonite violated senior secured facility debt covenants in June 2008, which led to a payment default on the senior subordinated notes. The secured facility lenders blocked payments on the senior subordinated notes in September 2008 and subsequently agreed to a forbearance agreement in November 2008. The company reached a restructuring agreement with credit facility lenders and noteholders and the prepackaged bankruptcy filing was made to effectuate the restructuring transactions.

Enterprise Valuation Estimate Summary Going Concern Valuation The company’s investment banker provided a hypothetical going concern reorganization value estimate of approximately $500 million as of June 8, 2009. This valuation point was the only value provided, with no valuation range, as is more typical. The equity value was estimated to be $266 million, which incorporated $300 million of emergence debt and $33 million of estimated cash on the effective date. The value was based on several methodologies and assumed the achievement of management’s forecast. Discounted Cash Flow Approach The investment banker assumed a discount rate range of 23%–27% and a terminal value multiple of 4.5x–5.5x EBITDA. The management forecast included this EBITDA estimate: ($ Mil.) 2010 2011 2012 2013 EBITDA 61 102 172 251 Comparable Company Approach Low-high multiple range of 5.3x–8.0x EBITDA of the company’s peers, a multiple range of 7.0x–8.0x 2010 EBITDA was applied in the comparable company analysis. Comparables used were: American Woodmark Corp., Masco Corp., Mohawk Industries, Inc., Owens Corning, The Sherwin-Williams Company, and Trex Co., Inc. Chapter 7 Liquidation Alternative Valuation

Based on a discount to book value as of Jan. 25, 2009, the liquidation alternative valuation resulted in gross estimated proceeds of $375 million–$529 million. The book values and percentage of book values used for assets included: • Cash of $154 million valued at 100% of book value • Accounts receivable of $179 million at 55%–76% • Buildings and leaseholds of $160 million at 20%–40% • Machinery and equipment of $495 million at 0.5%–11% • Intangibles of $145 million at 4% • The liquidation costs were estimated to range from $134 million–$147 million. Under this scenario, the senior secured lenders were estimated to recover 16%–26% of their claim amounts versus 37.9% under the plan of reorganization.

aCanadian entities filed a separate proceeding in Canadian court. Source, unless otherwise noted: Company disclosure statement relating to the joint plan of reorganization dated April 16, 2009. Note: This is an update of a case study originally published Feb. 14, 2013.

Leveraged Finance


Masonite Corporation (Continued) Estimated Recoveries for Select Claims ($ Mil., Except Where Noted) Form of Distribution




Secured Notes

Unsecured Notes

Subordinated Notes

New Equity

Options/ Warrants

DIP There Was No DIP Facility 0 Not Applicable Not Applicable — — — — — — Secured Senior Secured Revolving and

Term Loan Facility 1,396 37.9 RR4 — 200 100 — 229 —

Unsecured 11% Senior Subordinated Notes Due 2015 ($412 Million U.S. and $357.9 Million Canadian Series)

770 4.8 RR6 — — — — 37 —

Unsecured General Unsecured Creditors (Trade)

Not available

100.0 RR1 — — — — —

Intercompany Intercompany Claims Not Disclosed

0.0–100.0 Not Applicable — — — — — —

Equity Equity Interests in Masonite Holding Corp.

0 0.0 RR6 — — — — — —

Estimated Claims 2,166 — Recoveries 0 200 100 0 266 0 New Borrowings at Emergence 0 — — — — — — — —


0 — — — — — — — —

Claim Seniority Claim Type Description DIP There Was No DIP Facility • The court permitted the company to use cash on hand and cash from operations to fund itself during the short

bankruptcy. Secured Senior Secured Revolving and

Term Loan Facility • Lenders received, in the form of a pro rata share of $200 million of new secured loans, $100 million of pay in kind

(PIK) loans and 97.5% of the new common stock. • Since the disclosure statement indicates a 37.9% recovery percentage and a $266 million total equity value, Fitch

assumes that there were open but undrawn letters of credit of approximately $74 million and excludes this from the $1,470 million secured claim amount.

• Holders could elect to receive $1 million of new PIK notes for each $2 million of common stock they would have received under the plan, up to a maximum PIK loan amount of $100 million.

• The facility was secured by substantially all assets and guaranteed by the parent and subsidiaries. • The facility was scheduled to mature in 2013.

Unsecured 11% Senior Subordinated Notes Due 2015 ($412 Million U.S. and $357.9 Million Canadian Series)

• The senior subordinated noteholders received distributions in the form of 2.5% of the new common stock and 100% of the new warrants.

• The notes had parent and subsidiary guarantees. Unsecured General Unsecured Creditors

(Trade) • Masonite received court approval to pay up to $56 million to unsecured prepetition creditors in the ordinary course

of business. • Any unpaid trade claims on the effective date were paid in full in cash. • Trade creditors were unimpaired and unaffected by the bankruptcy.

Intercompany Intercompany Claims • At the company’s option, intercompany claims were reinstated or cancelled. • There was no distribution made for intercompany claims.

Equity Equity Interests in Masonite Holding Corp.

• Equity interests were cancelled with no distribution. • Not entitled to vote on the plan; deemed to vote to reject the plan.

RR – Recovery Rating. DIP – Debtor in possession. Source, unless otherwise noted: Company disclosure statement relating to the joint plan of reorganization dated April 16, 2009. Note: This is an update of a case study originally published Feb. 14, 2013.

Leveraged Finance


Masonite Corporation (Continued) Additional Information Cash on Filing Date Not disclosed. There was cash of $176.6 million as of Jan. 25, 2009. Prepetition Bank Facility Commitments $350 million senior secured revolver. Prepetition Bank Facility Borrowings on Filing Date $335 million senior secured revolver borrowings and $1.135 billion senior secured term loan debt. Was the DIP a New Money Facility or Roll Up of a Prepetition Facility?

There was no DIP facility. The company was permitted to use cash collateral to fund operations during the bankruptcy.

Executory Contracts The schedule of rejected contracts included only the service and management advisory contract with Kohlberg Kravis Roberts & Company.

Deficiency Claims No Contingent Claims No material. Intercompany Claims Reinstated or cancelled at Masonite’s option. Pension Claims/Motions The pension plan was continued and funding and administration were in accordance with ERISA and the tax

code. Postpetition Interest? Not available. If Yes, Recipient Class Not available. Concession Payments Yes Recipient Unsecured clams and senior subordinated notes.

DIP – Debtor in possession. Source: Fitch Ratings, company disclosure statement. Note: This is an update of a case study originally published Feb. 14, 2013.

Leveraged Finance


Momentive Performance Materials Inc. ($ Mil., Except Where Noted)

Issuer Profile Key Drivers of Bankruptcy Filing Fitch Industry Classification Industrial/Manufacturing Key Driver Untenable Capital Structure Subsector Produces Silicones and Products Derived

from Quartz and Specialty Ceramics Key Driver Deep Cyclical Trough

Financial Profile

Prepetition Ticker Symbol Not Publicly Traded Petition Date Assets 2,694 Emergence Parent Company Momentive Performance 12-Month Period Amount

Name/Ticker Materials/Privately Held





Low 2,000

Court District Southern District of New York

High 2,450 Substantive Consolidationb No

Midpoint EV (Value) 2,225



Low 708


High 1,158 Duration (Months) 5




Total Debt 3,826 1,292



Debt Shed in Bankruptcy — 2,534


Events Leading Up to Bankruptcy (or Contributing Factors) Momentive Performance Materials operated with high leverage since it was purchased by Apollo Global Management for $3.8 billion in 2006. The debt/EBITDA ratio exceeded 16x as of Dec. 31, 2013. Weak global economic growth and slowdowns in industrial production and consumer spending in international markets, as well as overcapacity in the silicone markets led to negative FCF of more than $200 million in 2013. The company was unable to invest as needed in capital spending and R&D and then did not make a scheduled interest payment in April 2015 because of insufficient funds. One source of liquidity, the $75 million cash flow revolver, was set to mature at the end of 2014. Following the missed payment, creditor negotiations were started, which led to a restructuring support agreement and a related backstop agreement for $600 million of new equity capital that was raised through a rights offering made available to second-lien lenders primarily. The funds were used to partially fund plan distributions and also for general corporate purposes of the reorganized company.

Valuation Estimate Summary Going Concern Enterprise Valuation The third-party valuation advisor estimated a going concern enterprise value in the range of $2 billion–$2.45 billion. The advisor employed several methodologies, including a discounted cash flow analysis, a selected publicly traded company analysis and a precedent transaction analysis. The assumptions for discount rates, multiples and peer names were not disclosed. The advisor considered management’s financial forecast in the analysis, which included the following EBITDA forecast: ($ Mil., As of Dec. 31) 2015 2016 2017 2018 EBITDA 297.1 334.3 342.8 356.2 Liquidation Value Alternative The hypothetical Chapter 7 liquidation alternative valuation resulted in estimated gross proceeds in the range of $804 million–$1.285 billion. The estimate was based on percentages of asset book value as of March 31, 2014 for each of the three business lines (performance materials, quartz and silicones) and by geography. On a consolidated basis, book values and recovery rate ranges included: • Cash and equivalents of $32.7 million at 100% • Accounts receivable of $86.7 million at 70%–84% • Inventory of $175.3 million at 53%–59% • PP&E of $432.7 million at 8%–37% • $1.62 billion due from affiliates at 23%–34% aNon-U.S. operations were excluded. bDebtors, with consent of requisite investors, reserve the right to substantively consolidate two or more debtors provided it does not materially and adversely affect distributions to any claim. cSource is 10-K for year ended Dec. 31, 2013. Source, unless otherwise noted: Company disclosure statement for the joint plan of reorganization dated June 23, 2014.

Leveraged Finance


Momentive Performance Materials Inc. (Continued) Estimated Recoveries for Select Claims ($ Mil., Except Where Noted)





Secured Notes

Unsecured Notes

Subordinated Notes

New Equity

Options/ Warrants

DIP and Priority DIP Revolver and Term Loan of $373 Million, and $53 Million of Administrative Expenses and Fee Claims

405 100.0 RR1 426 — — — — —

Secured Cash Flow Facility due 2014 21 100.0 RR1 21 — — — — — Secured $1.1 Billion 8.875% First-Priority

Senior Secured Notes due 2020 1,100 100.0 RR1 1,100 — — — — —

Secured $250 Million 10% 1.5-Lien Notes due 2020

250 100.0 RR1 — 250 — — — —

Secured $1.336 Billion Springing Second-Lien Notes due 2021

1,161 plus EUR133

12.8–28.1 RR5 — — — — 71–281 —

Subordinated $382 Million 11.5% Senior Subordinated Notes due 2016

382 0.0 RR6 — — — — — —

Unsecured Holding Company Pay in Kind (PIK) Note

877 <1 RR6 9 — — — — —

Unsecured General Unsecured Claims 24 100.0 RR1 24 — — — — — Equity Existing Interests Not

Applicable 0.0 RR6 — — — — — —

Estimated Claims 3,058 — Recoveries 1,579 250 0 0 71–281 0 New Borrowings at Emergence 1,000 — — — — — — — —


42 — — — — — — — —

Claim Seniority Claim Type Description DIP and Priority $373 Million DIP Revolver and Term

Loan, and $53 Million of Administrative Expenses and Fee Claims

• The borrowings outstanding as of the disclosure statement date were not provided. Fitch uses the assumed drawings for the liquidation alternative analysis of $162 million under the revolver and $300 million under the term loan as estimates of emergence date usage.

• Claims were satisfied in full either in the form of cash or the conversion into an exit ABL facility. The presentation above assumes cash payments to claim holders.

Secured Cash Flow Facility due 2014 • Paid in full in cash, including interest but excluding any make-whole premium. Secured $1.1 Billion 8.875% First-Priority

Senior Secured Notes due 2020 • Repaid with accrued prepetition interest. The $1.1 billion is principal portion of claim only, as the exact

amount of interest was not available. • The projections indicated combined first-lien and 1.5-lien accrued interest of $56.2 million.

Secured $250 Million 10% 1.5-Lien Notes due 2020

• Notes were replaced with new notes of equal face value. • The $250 million claim amount excludes interest. However, holders were also entitled to accrued prepetition

interest (accrued interest amount not available). Secured $1.336 Billion Springing Second-Lien

Notes due 2021 • The second-lien note claims were converted into a share of the new common equity that provided

ownership of 8.7%–27.6% of the new stock. • Bonds issued in three separate series. • The majority of the new equity was sold in the $600 million rights offering made to holders of second-lien

notes to purchase new shares at a price determined by using the pro forma capital structure and an enterprise value of $2.2 billion and applying a 15% discount to the equity value. The projected recovery range does not include any value from participation in the rights offering.

• The recovery rate will vary based on the total number of new shares issued on the effective date, which in turn depends upon the amount of net debt on that date.

Subordinated $382 Million 11.5% Senior Subordinated Notes due 2016

• No recovery on account of subordination provisions. • Deemed to have rejected the plan of reorganization.

Unsecured Holding Company Pay in Kind (PIK) Note

• Recovery in the form of pro rata share of cash minus holdings share of administrative expenses and certain other costs.

Unsecured General Unsecured Claims • Unimpaired • Paid in full in cash on the effective date or in the ordinary course of business. • Claims included postpetition interest.

Equity Existing Interests • No recovery.

RR – Recovery Rating. DIP – Debtor in possession. ABL – Asset-based loan. Source, unless otherwise noted: Company disclosure statement for the joint plan of reorganization dated June 23, 2014.

Leveraged Finance


Momentive Performance Materials Inc. (Continued) Additional Information

Cash on Filing Date $3.5 million. Prepetition Bank Facility Commitments $270 million ABL facility and $75 million cash flow facility. $34 million of the ABL facility commitment was not

available on the petition date because the company did not meet the minimum fixed-charge coverage ratio. Prepetition Bank Facility Borrowings on Filing Date $166 million of revolver borrowings plus $71 million of letters of credit under the $270 million ABL facility and

$20.7 million borrowed under the $75 million cash flow facility. Was the DIP a New Money Facility or Roll Up of a Prepetition Facility?

The DIP facilities were new money. The DIPs included a $270 million ABL consisting of a $200 last-in, first-out facility and a $70 million first-in, last-out facility and a $300 million DIP term loan. The facilities were designed to convert to exit facilities.

Other Notable Issues None Executory Contracts All warranty obligations, benefit plans and pension plans were treated as assumed executory contracts. A shared

services contract was amended, then assumed. The existing management agreement was terminated with related claims waived with no distributions.

Deficiency Claims The second-lien noteholder deficiency claims were treated pari passu with the senior subordinated note claims and did not receive any distributions under the plan of reorganization.

Contingent Claims and/or Contingent Recoveries Redemption premium adversary proceedings initiated against the trustees for the first-lien and 1.5-lien notes. Intercompany Claims Reinstated, paid, cancelled or discharged to the extent deemed appropriate by the reorganized company.

However, no payments of claims were made to Holdings (parent).

Pension Claims/Motions The company continued funding its pension plans. The U.S. defined benefit plans were underfunded by $59 million as of Dec. 31, 2013. The company also maintained postretirement benefit plans.

Postpetition Interest? Yes If Yes, Recipient Class General unsecured claims (trade). Concession Payments Yes Recipient and Comments Trade creditors were paid 100% of their claim amounts.

DIP – Debtor in possession. ABL – Asset-based loan. Source: Fitch Ratings, company disclosure statement dated June 23, 2014.

0

20

40

60

80

100

120

(% of Par)

Data Source: Fitch Ratings, Advantage Data.

Bond Price History — Momentive Performance Materials, Inc.($635 million 9% Second Priority Springing Lien Notes due 2021)



Leveraged Finance


Motor Coach Industries International ($ Mil., Except Where Noted)

Issuer Profile Key Drivers of Bankruptcy Filing Fitch Industry Classification Industrial/Manufacturing Key Driver Deep Cyclical Trough Subsector Designs, Manufactures and Services Intercity

Coaches



Name/Ticker Motor Coach Industries/Privately Held 12-Month Period Amount





Low 350






Low 7






Total Debtc 767 175





Events Leading Up to Bankruptcy (or Contributing Factors) There was an 18% decrease in 2008 sales to $644.2 million due to a sharp decline in new coach orders by private sector companies as well as certain public sector orders declining to replenishment levels after the completion of a large expansion and regional integration program. At the same time, profitability was adversely affected by a decline in the U.S. dollar relative to the Canadian dollar, by commodity price increases in raw materials including copper, aluminum and steel, and by cost increases in engine components. In addition to the business challenges, each of the three credit facilities was scheduled to mature on Dec. 1, 2008, and credit markets and general economic conditions were deteriorating prior to the maturity dates. The company’s capital structure became unsustainable. Efforts were made to sell the business in early 2008, but did not come to fruition.

Valuation Estimate Summary Going Concern Enterprise Valuation The third-party valuation advisor estimated a midpoint going concern enterprise value of $385 million. The advisor reviewed historical financial statements and financial forecasts, which are summarized below. Methodologies applied in the valuation included a precedent merger transaction analysis and a comparable peer trading valuation. The $160 million of new preferred issue was assumed to be used to fund the plan. The peer names and other inputs were not provided.

($ Mil.) 2008 2009 2010 2011 Management Forecast of EBITDA 19.8 57.5 74.3 105.8 Liquidation Value Alternative The hypothetical Chapter 7 liquidation alternative valuation estimated total liquidation value in the range of $147.0 million and $175.3 million. The analysis was based on percentages of asset book value as of Sept. 27, 2008. Assets and percentages included: • Cash of $2.8 million at 100% • Trade and other receivables of $32.3 million at 75%–90% • Inventories of $126.6 million at 73%–86% • PP&E of $21.9 million at 15.4%–20.5% • Intangibles of $60.5 million at 0% aFiling excluded Canadian affiliates. bPrepetition EBITDA is actual through Sept. 30, 2008 and projected for fourth quarter 2008, including Fitch estimate of $17.9 million of depreciation. No 2007 financials available. c$174.9 million is net debt consisting of exit revolver debt of $111.8 million, a junior exit loan of $56.6 million and a Manitoba term loan of $6.6 million. Source, unless otherwise noted: First amended company disclosure statement dated Dec. 17, 2008.

Leveraged Finance


Motor Coach Industries International (Continued) Estimated Recoveries for Select Claims ($ Mil., Except Where Noted)





Secured Notes

Unsecured Notes

Subordinated Notes

New Equity

Options/ Warrants

DIP and Priority Junior/Senior DIP Not Available

100.0 RR1 279 — — — — —

Secured First-Lien Credit Agreement due December 2008

0 100.0 RR1 — — — — — —

Secured $163 million Second-Lien Credit Agreement due December 2008

85 100.0 RR1 85 — — — — —

Secured Third-Lien Credit Agreement due December 2008

209 0.0–34.0 RR5 — — — — 30 —

Secured Other Secured Not Available

100.0 RR1 — — — — — —

Unsecured General Unsecured Not Available

0.0 RR6 — — — — — —

Subordinated MCII 11.25% Senior Subordinated Notes

59 0.0 RR6 — — — — — —

Subordinated Holdings 11.25% Subordinated Notes

131 0.0 RR6 — — — — — —

Equity Interests Not Available

0.0 RR6 — — — — — —




12 — — — — — — — —

Claim Seniority Claim Type Description DIP and Priority Junior/Senior DIP • Repaid in full with proceeds of the exit facilities.

• The DIP facilities were used to repay prepetition first-lien and second-lien loans, and in turn were paid with proceeds from exit loans on the plan effective date.

Secured First-Lien Credit Agreement due December 2008

• Approximately $99.2 million borrowed under this facility was repaid on Sept. 19, 2008 using proceeds of the DIP facility.

Secured $163 Million Second-Lien Credit Agreement due December 2008

• Paid in full in cash, with $85 million of petition date claims repaid on Sept. 19, 2008 using proceeds from the junior DIP facility and the balance paid on the plan effective date.

• Original principal amount of $143.9 million. • Floating rate at LIBOR + 8.5%, with interest in excess of 11% paid in kind.

Secured Third-Lien Credit Agreement due December 2008

• Received 100% of the new common stock in a debt-to-equity conversion and the right to purchase new preferred stock, pursuant to a $160 million rights offering.

• Interest rate of LIBOR + 12% with interest in excess of 12% paid in kind. Secured Other Secured • Claims paid in full in cash or via the delivery of the collateral and payment of interest. Unsecured General Unsecured • No distributions. Subordinated MCII 11.25% Senior Subordinated

Notes • No distributions.

Subordinated Holdings 11.25% Subordinated Notes

• No distributions.

Equity Interests • No distributions.

RR – Recovery Rating. DIP – Debtor in possession. Source, unless otherwise noted: First amended company disclosure statement dated Dec. 17, 2008.

Leveraged Finance


Motor Coach Industries International (Continued) Additional Information

Cash on Filing Date Not available. Approximately $900,000 as of Sept. 30, 2008. Prepetition Bank Facility Commitments $205 million first-lien facility.

Prepetition Bank Facility Borrowings on Filing Date Usage under the $205 million first-lien facility consisted of $99.2 million of U.S. borrower loans, $23.5 million of Canadian borrower loans and letters of credit totaling $3.2 million.


The $315 million DIP was partially a roll up of the prepetition first-lien debt and partially a new money facility. The DIP was comprised of a $170 million senior DIP financing facility (reduced to $166.4 million when one lender dropped out and a replacement lender committed at a lower level). The senior DIP loan was used to repay the prepetition first lien and a $145 million junior DIP financing facility that was used to repay $85 million of second-lien obligations in September 2008.

Other Notable Issues No Executory Contracts Union contracts were assumed. Customer programs (e.g. loyalty programs, deposits) were honored. Deficiency Claims No Contingent Claims and/or Contingent Recoveries Greyhound Lines filed suit against the company for breach of contract and breach of warranty with respect to its

purchases of certain G Series models. Following the petition date, Greyhound asserted claims in excess of $100 million, which the company disputes. In addition, there were other disputed claims, and a reserve account was established by the reorganized debtors for disputed claims as deemed appropriate.

Intercompany Claims These claims were classified as unimpaired. Claims were compromised, reinstated, contributed to capital or cancelled to the extent deemed appropriate by reorganized holdings in consultation with Franklin Mutual Advisors, LLC, who provided the backstop for the rights offering.

Pension Claims/Motions Pension plans were assumed. Postpetition Interest? No If Yes, Recipient Class Not applicable. Concession Payments No Recipient and Comments Not applicable.

DIP – Debtor in possession. Source: Fitch Ratings, company disclosure statement dated Dec. 17, 2008.

Leveraged Finance


National R.V. Holdings, Inc. ($ Mil., Except Where Noted)

Issuer Profile Key Drivers of Bankruptcy Filing Fitch Industry Classification Industrial/Manufacturing Key Driver Deep Cyclical Trough Subsector Producer of Recreational Vehicles


Prepetition Ticker Symbol NVH Financial Profile Petition Date Assets 127 Emergence Parent Company

Name/Ticker Not Applicable/Liquidated 12-Month Period Amount

Prepetition EBITDAa 12/31/06 (10)

Bankruptcy Summary Post-Emergence EBITDA Forecast Not Applicable Liquidated



Low 22

Court District Central District of California





Low 0



Midpoint EV/Post-Emergence EBITDA Estimate (x) Not Applicable


(as Liquidation)




Total Debt 10 0

Resolution Liquidation (under Chapter 11)

Consolidated Leverage (x) (1.0) Not Applicable

Debt Shed in Bankruptcy 10


100

Events Leading Up to Bankruptcy (or Contributing Factors) The filing resulted from a steep decline in recreational vehicle (RV) sales and costs related to a serious defect in the fiberglass sidewall material supplied to the company by Crane Composites, which had been used in over 70 RVs. This problem resulted in operating losses, liquidity problems and a recall for affected RVs and a large incremental expense, as well as a lawsuit against the supplier. To raise liquidity, the company sold one of its subsidiaries, Country Coach, for $38.75 million on Feb. 20, 2007 and used $24.5 million to pay a Wells Fargo loan and $8.6 million to pay vendor payables, with the remainder retained for working capital purposes. The Wells Fargo asset-based loan (ABL) facility commitment was reduced from $40 million to $15 million in February 2007 as a result of covenant violation-related events of default. Shortly afterward, a sale leaseback was entered for manufacturing and operating facilities, which raised $19 million. However, operating capital became further constrained in June 2007 when the State of California’s Office of Self Insurance Plans notified the company that it did not meet minimum standards for credit ratings to self-insure and had to post a $5.5 million letter of credit, and there were continued operating losses. The company was notified by the NYSE that it did not meet minimum share price and market value listing standards in October 2007.

Valuation Estimate Summary Value Determined by Sum of Liquidation Proceeds of All Assets The orderly disposition of all assets in a Chapter 11 liquidation resulted in gross proceeds of $20 million, excluding the $38.5 million proceeds from the Country Coach subsidiary that was completed prior to filing. Assets included RVs and work in progress inventory, including $13.9 million from the sale of 145 completed RVs to Dennis Dillon RV LLC, accounts receivable, $1.6 million from the sale of South Coast emission credits and $750,000 from the sale of the Florida service center property. The company also was awarded $3.1 million of damages from the Kemlite litigation with Crane Composites. After fees, the company expected to receive approximately $2 million–$2.5 million of additional proceeds.

Pre-Bankruptcy Going Concern Offer in November 2005 While not reflective of the bankruptcy asset value, Fitch notes that a group led by the founder of National RV Holdings offered $92 million for the company in November 2005. The group offered $6.25 per share for the 85% of the company not already owned. This information is provided to illustrate the steep drop in value in the years preceding the filing. The offer was approximately 10% above the trading price. The board of directors rejected the offer as inadequate and said the company expected to create more value for shareholders through improvements to business strategy. Liquidation Value Alternative No Chapter 7 liquidation alternative valuation was provided. aPrepetition EBITDA sourced from 2006 10-K. Source, unless otherwise noted: First amended company disclosure statement dated Nov. 4, 2008.

Leveraged Finance


National R.V. Holdings, Inc. (Continued) Estimated Recoveries for Select Claims ($ Mil., Except Where Noted)





Secured Notes

Unsecured Notes

Subordinated Notes

New Equity

Options/ Warrants

DIP and Priority Fees, Administrative, Priority Tax, Non-Tax and other Administrative and Priority Claims

7 100.0 Equivalent Recovery

7 — — — — —

Secured ABL Facility 0 100.0 RR1 10 — — — — — Unsecured NRV General Unsecured 11–19 7–19 RR6 — — — — — — Unsecured NRVH General Unsecured 1 100.0 RR1 1 — — — — — Unsecured Convenience 2 65.0 RR3 1 — — — — —

Estimated Claims 21–39

Recoveries 19 0 0 0 0 0

New Borrowings at Emergence Not Applicable

— — — — — — — —


0 — — — — — — — —

Claim Seniority Claim Type Description DIP and Priority Fees, Administrative, Priority Tax,

Non-Tax and Other Administrative and Priority Claims

• Paid in full in cash

Secured ABL Facility • Loans and letters of credit drawdowns paid in full with proceeds of asset sales and using restricted cash prior to the plan effective date.

• Approximately eight months prior to the filing date, repayments of $24.5 million were made using proceeds of the sale of the Country Coach subsidiary, and the facility was reduced to $15 million–$40 million.

• Additional repayments of roughly $7 million were made when the company sold operating and manufacturing facilities in a sale leaseback.

• Facility was secured by all assets, with borrowings limited to availability based on advances against inventory and receivables.

Unsecured NRV General Unsecured • Plan effective date recoveries estimated in the range of 7%–19% of the claim amount. Unsecured NRVH General Unsecured • Paid in full as a result of intercompany settlement. Unsecured Convenience • 65% recoveries per plan.

RR – Recovery Rating. DIP – Debtor in possession. ABL – Asset-based loan. Source, unless otherwise noted: First amended company disclosure statement dated Nov. 4, 2008.

Leveraged Finance


National R.V. Holdings, Inc. (Continued) Additional Information

Cash on Filing Date $1 million. Prepetition Bank Facility Commitments $15 million ABL revolving and letter of credit facility. Approximately eight months prior to the bankruptcy date, the

ABL facility was reduced to $15 million from $40 million following covenant violations. Prepetition Bank Facility Borrowings on Filing Date $2.4 million of ABL revolver borrowings and $7.2 million letters of credit. Was the DIP a New Money Facility or Roll Up of a Prepetition Facility?

There was no DIP.

Other Notable Issues None Executory Contracts Rejected the Perris leases related to the sale leaseback of manufacturing and operating facilities in California. All

other executory contracts were also going to be rejected prior to the plan effective date. Deficiency Claims No Contingent Claims and/or Contingent Recoveries Contingent recoveries from First Industrial of up to $1 million relating to company’s assertion that letter of credit

proceeds were misapplied. Other contingent recoveries up to a potential $1.5 million relating to life insurance, return of Wells Fargo overcollateralization and other items.

Intercompany Claims The plan embodies a proposed global settlement and compromise, known as the "Intercompany Settlement" of various claims and disputes between debtors. This settlement provides for a substantive consolidation of the two estates and negotiated adjustments to the unsecured claims of NRVH (the publicly held holding company that owned 100% of NRV’s equity) and provides for distributions to allowed interests in NRVH. As of the petition date, a $45 million receivable was due from NRV to NRVH.

Pension Claims/Motions The 2006 10-K indicated that the company had a defined contribution 401(k) plan only. Postpetition Interest? No If Yes, Recipient Class Not applicable. Concession Payments Yes Recipient and Comments Holders of NRVH preferred and common stock in the intercompany settlement with NRV to resolve intercompany

receivable disputes, holders of convenience claims.

DIP – Debtor in possession. ABL – Asset-based loan. Source: Fitch Ratings, company disclosure statement dated Nov. 4, 2008.

Leveraged Finance


Neenah Enterprises, Inc. ($ Mil., Except Where Noted)

Issuer Profile Key Drivers of Bankruptcy Filing Fitch Industry Classification Industrial/Manufacturing Key Driver Deep Cyclical Trough Subsector Manufactures and Sells Castings and Forgings


Prepetition Ticker Symbol NENA Financial Profile Petition Date Assets 287 Emergence Parent Company

Name/Ticker Neenah Enterprises/ Privately Held


Prepetition EBITDAa 9/30/09 (8)

Bankruptcy Summary Post-Emergence EBITDA Forecastb 9/30/11 52



Low 270





Equity Value Rangec Confirmation or Conversion Date 7/6/10

Low 121






Total Debt 364 149





Events Leading Up to Bankruptcy (or Contributing Factors) A cyclical slowdown in infrastructure spending adversely affected demand for municipal market casting products such as manhole covers, sewer drain castings, heavy duty airport castings and tree grates. In addition, the metal casting business was also affected by the weak economic conditions that reduced demand in industrial customer end markets, including heavy-duty truck, rail, construction, HVAC and agricultural equipment. Lower sales led to reduced profits and cash flow, resulting in diminished liquidity and a reduction in the borrowing base under the asset-based loan (ABL) facility. Efforts to refinance the credit agreement, including contacting more than 60 lenders, or raise other capital were unsuccessful. The company then defaulted on financial covenants under the ABL. This was the company’s second Chapter 11 filing, with a prior filing in August 2003 made as a result of similar cyclical declines in primary end markets.

Valuation Estimate Summary Fundamental Going Concern Enterprise Valuation The third-party valuation advisor estimated a range of total enterprise value of $270 million–$320 million, with a midpoint of $295 million. The valuation was based on several approaches, including a discounted cash flow analysis, a precedental transaction analysis and a peer comparable multiple analysis. The assumptions and specific company names were not provided. The advisor considered management’s forecasted results, including the following EBITDAR forecast. ($ Mil, FYE Sept. 30) 2011 2012 2013 2014 EBITDAR Forecast 52 63 75 84 Liquidation Value Alternative

The liquidation hypothetical valuation alternative was based on percentages of balance sheet book value as of Feb. 2, 2010 and resulted in a range of total proceeds estimated to be $106 million–$144 million. Asset book values and recovery percentages applied included: • Cash and equivalents of $24 million at 100% • Receivables of $33 million at 70%–87% • Inventory of $45 million at 71%–77% • PP&E of $221 million at 8%–19% • Intangibles of $37 million at 13% to 27% aSource of prepetition EBITDA is 10-K for year ended Sept. 30, 2009. bThis is EBITDAR forecast. cExcludes warrant value of $1.3 million–$3.4 million. Source, unless otherwise noted: Company disclosure statement for the joint plan of reorganization dated April 27, 2010.

Leveraged Finance


Neenah Enterprises, Inc. (Continued) Estimated Recoveries for Select Claims ($ Mil., Except Where Noted)





Secured Notes

Unsecured Notes

Subordinated Notes

New Equity

Options/ Warrants

DIP and Priority DIP 80 100.0 RR1 80 — — — — —

Secured ABL First In Last Out Credit Agreement 54

100.0 RR1 54 — — — — —

Secured $225 Million 9.5% Secured Notes due 2017

237 57.0 RR3 — — — — 136 —

Subordinated $75 Million 12.5% pay in Kind/Cash Pay Notes due 2015

89 4.0 RR6 — — — — 4 —


100.0 RR1 — — — — — —

Intercompany Equity Interests Not Available

0.0 RR6 — — — — — —




0 — — — — — — — —

Claim Seniority Claim Type Description DIP and Priority DIP • The $50 million DIP revolver claims were paid in full in cash.

• The $25 million of DIP term loan claims were either paid in full in cash or converted to an exit facility (final form not available).

Secured ABL First In Last Out Credit Agreement

• Repaid in full in cash. • Borrowings were governed by a borrowing base consisting of accounts receivable, inventories, casting

patterns and core boxes. • Facility had a first lien on the borrowing base assets as well as cash, insurance proceeds, intercompany

loans and a second-priority lien on secured noteholder priority collateral. Secured $225 Million 9.5% Secured Notes

due 2017 • Distributions consisted of $50 million of new notes and 97% of the new common stock (subject to dilution

for the management incentive plan). • Secured by a first lien on PP&E and other assets outside of the secured credit agreement priority assets

and a second lien on working capital assets and other priority collateral for the credit agreement. • Claim includes $12.5 million of accrued prepetition interest.

Subordinated $75 Million 12.5% Pay in Kind/Cash Pay Notes due 2015

• Distributions consisted of 3% of the new common stock (subject to management incentive plan dilution) and new warrants to acquire another 10% of the new common stock based on the attainment of certain market values.

• Interest was payable 5% in cash and 7.5% in kind. Unsecured General Unsecured Claims • Unimpaired.

• Paid in full in cash or reinstated and paid in the ordinary course of business. • The amount of claims was not specified in the disclosure statement. However, the statement noted that

many trade payables existing on the filing date were paid in the ordinary course as per first day orders and the remaining claim amount was small relative to debt claims.

Intercompany Equity Interests • Cancelled and extinguished with no distributions.

RR – Recovery Rating. DIP – Debtor in possession. ABL – Asset-based loan. Source, unless otherwise noted: Company disclosure statement for the joint plan of reorganization dated April 27, 2010.

Leveraged Finance


Neenah Enterprises, Inc. (Continued) Additional Information

Cash on Filing Date $24 million. Prepetition Bank Facility Commitments $54.2 million. Prepetition Bank Facility Borrowings on Filing Date $110.0 million. Was the DIP a New Money Facility or Roll Up of a Prepetition Facility?

The $140 million DIP was a new money facility and included a $90 million revolver and a $50 million multiple draw term loan.

Other Notable Issues None Executory Contracts Collective bargaining agreements, employee compensation and benefit plans and insurance policies were

assumed. Deficiency Claims None Contingent Claims and/or Contingent Recoveries Certain environmental litigation related to the manufacture of castings and forgings that is not resolved or

removed will continue after the effective date in the forums in which they were initiated. The company did not expect these liabilities to have a material effect on results. Contingent claims included disputed claims.

Intercompany Claims Reinstated or discharged at company’s option. Pension Claims/Motions The pension plan was continued, assumed, and unaffected by the plan of reorganization. Postpetition Interest? Yes If Yes, Recipient Class Secured claims. Concession Payments Yes Recipient and Comments General unsecured claims were paid in full in cash or reinstated and paid in the ordinary course of business.

12.5% subordinated notes claims received 3% of new common stock plus new warrants.

DIP – Debtor in possession. Source: Fitch Ratings, company disclosure statement dated April 27, 2010.

Leveraged Finance


The Newark Group, Inc. ($ Mil., Except Where Noted)

Issuer Profile


Fitch Industry Classification Paper and Forest Products

Key Driver Deep Cyclical Trough Subsector Manufactures Recycled Paperboard



Name/Ticker The Newark Group/ Privately Held


Prepetition EBITDA Not Disclosed Not Available


Enterprise Value (EV) Range (or Asset Value)

Did All Entities in the Group File?ª No

Low 285 Plan Proposed by Debtor

High 330

Court District New Jersey

Midpoint EV 308 Substantive Consolidation No

Equity Value Range (including Cash on Hand)


Low 135 Confirmation or Conversion Date 7/30/10

High 180


Midpoint EV/Post-Emergence EBITDA Estimate (x) 5.1 Duration (Months) 2

Petition Date Versus Emergence Date Filing — Type Chapter 11 (Prepackaged) Section 363 Asset Sale by Debtor No

Petition Date Emergence Date Voluntary or Involuntary Filing Voluntary

Total Debt 387 138

Postconfirmation Liquidating Trust No

Consolidated Leverage (x) Not Available 2.3 Resolution Emerged/Reorganized (Private)



Events Leading Up to Bankruptcy (or Contributing Factors) The Newark Group had a significant reduction in paperboard sales volumes starting in November 2008 as a result of the declines in general economic activity, particularly consumer nondurable good consumption. At the same time, the company was challenged by increases in costs. The cost of recovered paper for each ton of paperboard produced in North America increased 27% from 2007 and was 45% higher than in 2006. Volatility in oil prices and higher diesel fuel were also contributors to losses. In February 2009, the company received a notice of default under the credit linked (CL) credit facility for violation of the minimum fixed-charge coverage covenant and its availability test. Forbearance agreements were executed for the CL facility and the asset-based loan (ABL) facility. The interest payment on the 2014 notes was not made when due in March 2009. Ultimately, the bankruptcy and prepackaged plan of reorganization resulted from negotiations among the company, credit facility lenders and noteholders.

Enterprise Valuation Estimate Summary Going Concern Valuation The third-party valuation advisor estimated a midpoint enterprise value of $307.5 million using various methodologies, including the discounted cash flow, comparable company analysis and precedent transaction analysis. The assumptions and comparable companies were not disclosed. The enterprise value and corresponding equity value were used to estimate the recovery of the noteholders in the debt-to-equity conversion. The advisor relied on management’s forecast of financial results, which included the following EBITDA forecast: ($ Mil.) 2011 2012 2013 2014 EBITDA 59.8 63.1 65.4 67.6 Liquidation Value Alternative The analysis was based on discounts to the asset book value of $305 million as of Jan. 31, 2010 and resulted in estimated gross liquidation proceeds of $118 million–$143 million. The percentages of book value applied to assets included: • Accounts receivable, excluding intercompany receivables, of $53 million at 75%–83% of book value • Inventories of $31 million at 38%–45% • Property, plant and equipment of $119 million at 47%–59% • Liquidation costs and expenses were estimated to be in the range of $17 million–$21 million The liquidation alternative would have resulted in an estimated 65%–86% recovery for holders of the credit-linked facility, versus 100% in the going concern plan of reorganization. aNondebtor affiliates included foreign affiliates in Canada and Europe. Source, unless otherwise noted: Company disclosure statement for the joint prepackaged plan of reorganization dated May 7, 2010. Note: This is an update of a case study originally published Feb. 14, 2013.

Leveraged Finance


The Newark Group, Inc. (Continued) Estimated Recoveries for Select Claims ($ Mil., Except Where Noted) Form of Distribution




Secured Notes

Unsecured Notes

Subordinated Notes

New Equity

Options/ Warrants

DIP ORIX DIP Facility and ABL DIP Facility

Not Available

100.0 RR1 — — — — — —

Secured ABL Credit Facility — The New Group and NGI Were Borrowers

40 100.0 RR1 40 — — — — —

Secured Credit Linked (CL) Credit Facility 83 100.0 RR1 83 — — — — — Unsecured General Unsecured, Including

Trade Creditors 82 Not Available RR1 82 — — — — —

Subordinated 9.75% Senior Subordinated Notes Due 2014

202 75.4 RR2 — — — — 152 —

Subordinated Von Zuben Subordinated Note 5 33.3 RR4 0.25 — — 1.3 — — Equity Equity Interests, Excluding

ESOP Equity Interests Not

Available Not Available — — — — — 2 —

Estimated Claims 411 — Recoveries 205 0 0 1 154 0 New Borrowings at Emergence 110 — — — — — — — — Debt of Nonfiling Affiliates on

Emergence Date 0 — — — — — — — —

Claim Seniority Claim Type Description DIP ORIX DIP Facility and ABL DIP

Facility • The ABL facility claim was paid in full from the proceeds of the ABL exit facility, and the ORIX term loan DIP was

repaid with proceeds from the ORIX exit term loan. Secured ABL Credit Facility — The New

Group and NGI Were Borrowers • The prepetition ABL debt was rolled into the ABL DIP facility or paid in full in cash. • The facility was guaranteed and had a first lien on cash counts, receivables and inventory, and a second lien on

other assets excluding real property. • The facility had a total amount of $85 million with borrowing base limitations; the amount was reduced to

$50 million when the forbearance agreement was signed. • Holders were unimpaired and deemed to have accepted the plan.

Secured Credit Linked (CL) Credit Facility • The CL facility included a $15 million secured term loan and a $75 million secured credit-linked letter of credit facility.

• Collateral consisted of a first lien on real property and equipment, the capital stock of domestic subsidiaries that were at least 50% owned or controlled, 65% of the capital stock of NGI and Newark Paperboard Products Ltd. and a certain promissory note from NGI to The Newark Group Inc. In addition, the facility had a second lien on the ABL facility collateral.

• The prepetition CL facility borrowings were repaid with proceeds from the ORIX DIP facility. • Holders were unimpaired and deemed to have accepted the plan.

Unsecured General Unsecured, Including Trade Creditors

• General unsecured claims, including trade claims, accrued wages and pension payments, etc., were unaffected by the bankruptcy and unimpaired.

• To the extent not paid already in the ordinary course of business prior to emergence, general unsecured claims will be reinstated on the effective date.

Subordinated 9.75% Senior Subordinated Notes Due 2014

• The claim consisted of $175 million of principal plus accrued interest of more than $26 million. • Holders of the prepetition 9.75% notes received a pro rata share of 96.5% of the new common stock issued on the

effective date. • The recovery percentage was based on the midpoint of the estimated equity value.

Subordinated Von Zuben Subordinated Note • In connection with the termination of his employment with The Newark Group, former president and CEO Fred von Zuben exercised a right to put certain shares of capital stock owned by him to the Newark Group. In consideration, The Newark Group issued $250,000 cash and new subordinated installment notes to von Zuben.

Equity Equity Interests, Excluding ESOP Equity Interests

• Holders received a pro rata share of 1.5% of the new common stock that was issued on the effective date and five-year equity warrants to purchase 15% of the new common stock at a price based on an equity value of $157.5 million.

• 84% of the prepetition privately held stock was owned by the Mullen family and their affiliates and 16% was owned by The Newark Group’s employee stock ownership plan.

RR – Recovery Rating. DIP – Debtor in possession. ABL – Asset-based loan. Source, unless otherwise noted: Company disclosure statement for the joint prepackaged plan of reorganization dated May 7, 2010. Note: This is an update of a case study originally published Feb. 14, 2013.

Leveraged Finance


The Newark Group, Inc. (Continued) Additional Information Cash on Filing Date Not available. Cash balances were $62,000 as of January 2010. Prepetition Bank Facility Commitments $50 million. The ABL commitment was reduced to $50 million from $85 million at the time of execution of an

April 2010 forbearance agreement prior to the filing date. Prepetition Bank Facility Borrowings on Filing Date Approximately $40 million under the ABL facility, plus borrowings under the credit linked (CL) loan. Was the DIP a New Money Facility or Roll Up of a Prepetition Facility?

The $160 million DIP facilities were partially new money and partially used to refinance the prepetition ABL and CL term loan.

Executory Contracts Not disclosed. Deficiency Claims No, secured lenders were paid in full. Contingent Claims None. Intercompany Claims Intercompany claims remained in full force and effect on the effective date. Pension Claims/Motions The company continued to pay all retiree benefits and the reorganized company assumed the obligations to

make retiree benefit payments. Postpetition Interest? Yes If Yes, Recipient Class Secured claims. Concession Payments Yes Recipient Equity interests other than ESOP equity interests.

DIP – Debtor in possession. ABL – Asset-based loan. Source: Fitch Ratings, company disclosure statement for the joint prepackaged plan of reorganization dated May 7, 2010. Note: This is an update of a case study originally published Feb. 14, 2013.

Leveraged Finance


Oneida Ltd. ($ Mil., Except Where Noted)

Issuer Profile Key Drivers of Bankruptcy Filing Fitch Industry Classification Textiles and Furniture Key Driver Deep Cyclical Trough Subsector Tableware


Prepetition Ticker Symbol ONEI Financial Profile Petition Date Assets 329 Emergence Parent Company Oneida/Privately Held 12-Month Period Amount

Name/Ticker





Low 170

Court District New York — Southern





Low 41




Filing — Type Chapter 11 Petition Date Versus Emergence Date Section 363 Asset Sale by Debtor Yes — Partial Sale of Assets Voluntary or Involuntary Filing Voluntary


Total Debt 226 129





Events Leading Up to Bankruptcy (or Contributing Factors) Revenue declines as a result of competition and a general decline in demand for tableware products, an overleveraged balance sheet and unsustainable pension liabilities were key factors behind the bankruptcy. Large customers destabilized Onieda’s market by shifting to a diversified sourcing of tableware products, retail customer consolidations and the discontinued use of metal flatware in the airline industry. Oneida made a series of debt-funded acquisitions starting in 1996. An out-of-court restructuring was completed in August 2004 that converted some debt to equity following two years of negative EBITDA. However, the company remained overleveraged relative to cash flows and faced a term loan maturity in August 2007. Debt increased further as a result of extending the company’s manufacturing beyond its useful life by using debt to fund related capex. The company’s pension plan was underfunded in 2006, and expected required contributions over the subsequent three years would consume all or nearly all of Oneida’s cash flow (after payment of interest and Tranche A amortization). The accrued benefit liabilities of the pension plans were $70.6 million, and the assets were $30.6 million. From 2000 to 2005 the company’s total revenue declined 31%. EBITDA turned negative in 2004, and the company introduced the 2004 financial restructuring program. The program, intending to exchange $242 million of debt for equity, failed to properly recapitalize the company and led to the projection of insufficient liquidity by February 2007. Liquidity constraints resulted from required funding for the term loans’ amortization set to begin in early 2006, pension payments and revolver maturity in early February 2007.

Valuation Estimate Summary Going Concern Valuation The third-party valuation advisor estimated a midpoint enterprise value of $190 million. The primary methodologies used by the advisor were the comparable public company analysis, selected acquisition precedent transaction analysis and the discounted cash flow approach. The names of the comparable companies and discount rate assumptions were not disclosed. The advisor assumed the equitization of the Tranche B loans, the termination of the Oneida plan, the continuation of the Buffalo China union pension plan, the issuance to the Pension Benefit Guaranty Corporation (PBGC) of an unsecured $3 million interest-bearing note to satisfy the termination liability and the consummation of the $170 million exit facility. Management’s financial projections were also considered in the advisor’s valuation, with EBITDA forecast shown below: ($ Mil., FYE Jan. 27) 2007 2008 2009 Adjusted EBITDA 27.2 38.1 46.3 Liquidation Value Alternative The Chapter 7 alternative liquidation analysis was based on the company’s asset book values using the balance sheet as of Jan. 28, 2006, and assumes a six-month liquidation period. Net liquidation value was estimated at $93.1 million after $21.7 million of wind-down costs. Book value of assets and percentages applied included: • Accounts receivable of $33.6 million at 68% — The discount considered historical dilution, incremental dilution, bad debts and a liquidity discount • Inventories of $83 million at 53% — Calculated from discounts in the 23%–66% range • PP&E of $18.6 million at 48% — Third-party offers, tax assessed values, recent purchases and company management contributed to the discount rate • Intangibles of $111.7 million at 24% — The discount includes trade name value calculated using the relief from royalty method (totaling $26.6 million) and $0 recovery

of goodwill • 69% other assets — Only property held for sale and prepaid and recoverable taxes were assumed to have any value.

Source, unless otherwise noted: Second amended company disclosure statement for the joint prepackaged plan of reorganization dated May 22, 2006.

Leveraged Finance


Oneida Ltd. (Continued) Estimated Recoveries for Select Claims ($ Mil., Except Where Noted)





Secured Notes

Unsecured Notes

Subordinated Notes

New Equity

Options/ Warrants

DIP and Priority DIP and Other Priority 27 100.0 RR1 27 — — — — — Secured $125 Million Tranche A Term Loan due

2007 117 100.0 RR1 25 90 — — — —

Secured $80 Million Tranche B Term Loan due 2008

101 51.0 RR3 — — — — 52 —

Secured Other Secured 3 100.0 RR1 — 3 — — — — Unsecured General Unsecured Claims 15 100.0 RR1 15 — — — — — Unsecured Specific Unsecured Claims, Including

Unsecured PBGC Claims Associated with Distress Plan Termination and Italian Bank’s Guarantee Claim

58 0.0 RR6 — — — — — —

Secured Secured PBGC Claims 3 100.0 RR1 — — 3 — — — Equity Equity Interests Not

Available 0.0 RR6 — — — — — —

Estimated Claims 323

Recoveries 67 93 3 0 52 0



9 — — — — — — — —

Claim Seniority Claim Type Description DIP and Priority DIP and Other Priority • DIP claim amounts not available. Secured $125 Million Tranche A Term Loan due

2007 • Paid in full in cash, including principal and interest. • Unimpaired

Secured $80 Million Tranche B Term Loan due 2008

• Converted full loan amount, including principal and interest, into new equity interest in the reorganized Oneida.

• Term loan had PIK option. Secured Other Secured • Paid in full in cash or reinstated. Unsecured General Unsecured Claims • Paid in full in cash on the plan effective date or in the ordinary course of business. Unsecured Specific Unsecured Claims, Including

Unsecured PBGC Claims Associated with Distress Plan Termination and Italian Bank’s Guarantee Claim

• Received no distribution. • These claims consisted of Oneida’s guarantee of a certain EUR2.325 million letter of credit issued by

Banca Nazionale del Lavoro Spa in favor of Oneida Italy SRL, of which approximately EUR1 million was outstanding on the petition date, and the total amount owed to the PGBC in connection with the distress termination of the pension plans and related deficiency claims.

• The PBGC had agreed to subordinate its tax liens to the liens under the prepetition credit agreement liens in letter agreements signed in 2004 and 2005.

Secured Secured PBGC Claims • Distributions consisted of a $3 million unsecured note. Equity Equity Interests • $0 distributions.

RR – Recovery Rating. DIP – Debtor in possession. PBGC – Pension Benefit Guaranty Corporation. Source, unless otherwise noted: Second amended company disclosure statement for the joint prepackaged plan of reorganization dated May 22, 2006.

Leveraged Finance


Oneida Ltd. (Continued) Additional Information

Cash on Filing Date $950,000. Prepetition Bank Facility Commitments $30 million revolving credit facility, $125 million Tranche A term loan, and $80 million Tranche B term loan. Prepetition Bank Facility Borrowings on Filing Date $214 million. Was the DIP a New Money Facility or Roll Up of a Prepetition Facility?

The $40 million DIP facility was used to repay the prepetition revolver and was partially new money.

Other Notable Issues None Executory Contracts An unexpired real estate lease for a warehouse in Buffalo, NY was rejected. Deficiency Claims No recovery for PBGC deficiency claims. Contingent Claims and/or Contingent Recoveries None Intercompany Claims None Pension Claims/Motions Oneida Ltd. and Buffalo China salaried employee plans were terminated in distressed terminations and the

Buffalo China union plan was continued. Postpetition Interest? Yes If Yes, Recipient Class Term Loan A lenders. Concession Payments Yes Recipient and Comments General unsecured (trade).

DIP – Debtor in possession. Source: Fitch Ratings, company disclosure statement dated May 22, 2006.

Leveraged Finance


O’Sullivan Industries, Inc. ($ Mil., Except Where Noted)

Issuer Profile Key Drivers of Bankruptcy Filing Fitch Industry Classification Industrial/Manufacturing Key Driver Flawed Business Model or Obsolete Product Subsector Designs, Manufactures and Distributes


Ready-to-Assemble Furniture Prepetition Ticker Symbol 194

Financial Profile Petition Date Assets OSULP Emergence Parent Company O’Sullivan Industries/ 12-Month Period Amount

Name/Ticker OSULP.PK

Prepetition EBITDA FYE 6/30/05 2

Bankruptcy Summary Post-Emergence EBITDA Forecast FYE 6/30/07 14



Low 99

Court District Georgia — Northern

High 118 Substantive Consolidationb No




Low 79




Filing — Type Chapter 11 (Prearranged/Negotiated) Petition Date Versus Emergence Date Section 363 Asset Sale by Debtor No Voluntary or Involuntary Filing Voluntary


Total Debtc 260 30

Resolution Emerged/Reorganized (Public)




Events Leading Up to Bankruptcy (or Contributing Factors) Demand for ready-to-assemble furniture declined in the years preceding the filing, and increased competition also adversely affected O’Sullivan Industries’ sales. At the same time, the costs of particleboard and fiberboard, the primary raw materials used in the products, trended up sharply in 2004 and remained elevated in 2005. As a result of these and other factors, EBITDA decreased to $1.3 million in fiscal year 2005 from $19.3 million in the prior year. In consideration of these issues, the company hired a restructuring advisor in July 2005 and determined that a filing to reduce the debt would be the best option.

Valuation Estimate Summary Fundamental Going Concern Enterprise Valuation The third-party valuation advisor estimated a going concern value range of $99 million–$118 million. The valuation methodologies included a peer group trading analysis, with peers trading at median multiples of EBITDA of 6.7x and 6.0x in 2005 and 2006, respectively. Peers included Chromcraft Revington, Inc., Dorel Industries, Inc., Flexsteel Industries, Inc., Furniture Brands International, Inc., HNI Corp., Hooker Furniture Corp., La-Z-Boy Inc., Masco Corp., MITY Enterprises, Shermag, Inc., Stanley Furniture Company, Inc. and Steelcase, Inc. The precedent transaction valuation approach was also utilized. This analysis produced multiples of transaction value to LTM EBITDA in the 5.9x–7.4x range, with a median of 6.5x. A discounted cash flow approach was also employed. The advisor caluclated its DCF valuation using a discount rate range of 12%–14% and a terminal value multiple range of 5.7x–6.7x. The advisor relied on management’s financial projections, which included projected EBITDA of $14.2 million and $16.3 million for FY 2007 and FY 2008, respectively.

Liquidation Value Alternative The liquidation alternative valuation analysis under a hypothetical Chapter 7 liquidation scenario resulted in estimated gross proceeds in the range of $34.5 million–

$43.7 million. The analysis was based on percentages of the asset book value as of Oct. 15, 2005, including: • Cash of $0 • Trade receivables of $23.1 million at 58%–73% • PP&E of $49 million and goodwill of $44 million at 0% aExcluded foreign subsidiaries in the U.K. and Australia. bThe company reserved the right to seek a substantive consolidation order, but this was not sought as of disclosure statement date. cEmergence debt is net of cash. Source, unless otherwise noted: Company disclosure statement dated Oct. 14, 2005.

Leveraged Finance


O’Sullivan Industries, Inc. (Continued) Estimated Recoveries for Select Claims ($ Mil., Except Where Noted)

Allowed Claims


Equivalent RR Category


Claim Seniority Claim Type Cash Secured

Notes Unsecured

Notes Subordinated

Notes New

Equity Options/

Warrants DIP and Priority DIP, Administrative and Priority 7 100.0 RR1 7 — — — — — Secured Senior ABL Credit Facility 21 100.0 RR1 — — — — — — Secured Other Secured 10 100.0 RR1 — 10 — — — — Secured $100 Million 10.63% Senior Secured

Notes due 2008 108 82.8 RR2 — 10 — — 79 —

Unsecured $100 Million 13.375% Senior Subordinated Notes due 2009

100 0.0 RR6 — — — — — —


0.0 RR6 — — — — — —

Unsecured O’Sullivan Industries Holdings $15 Million Pay in Kind Note

31 0.0 RR6 — — — — — —

Equity Preferred and Common Equity Interests

0 0.0 RR6 — — — — — —

Estimated Claims 276 — Recoveries 7 20 0 0 79 0 New Borrowings at Emergencea 19 — — — — — — — —


0 — — — — — — — —

Claim Seniority Claim Type Description DIP and Priority DIP, Administrative and Priority • Paid in full. Secured Senior ABL Credit Facility • Unimpaired.

• Borrowings were repaid prior to the plan effective date. • Petition date usage consisted of $6 million of revolver borrowings and $14.4 million of outstanding letters of

credit. • Secured by a first lien on working capital assets and a second lien on fixed assets. • Borrowing base comprised of 86% of eligible receivables and 60% of eligible inventory.

Secured Other Secured • Reinstated • Consisted of $10 million of 6% industrial revenue bonds backed by letters of credit. • At the company’s election, the company could pay the claim in cash on the effective date, reinstate the

claim, pay the claim in the ordinary course of business or return the underlying collateral to the holder of the claim.

• Fitch presentation assumes these claims were reinstated. Secured $100 Million 10.63% Senior Secured

Notes due 2008 • Pro rata distributions to holders in the form of 10 million new shares of new common stock worth an

estimated $79.4 million and $10 million of new notes. • Claims included $7.8 million of accrued and unpaid prepetition interest.

Unsecured $100 Million 13.375% Senior Subordinated Notes due 2009

• No distributions under the plan. • Deemed to have rejected the plan of reorganization.

Unsecured General Unsecured Claims • No distributions of any kind. • Deemed to have rejected the plan.

Unsecured O’Sullivan Industries Holdings $15 Million Pay in Kind Note

• No distributions were made to the holding company note. • Original issue was $15 million, and petition date amount was $31 million.

Equity Preferred and Common Equity Interests

• All outstanding shares of preferred stock and common stock were cancelled with $0 distributions. • Deemed to have rejected the plan.

aConsisted of $15 million exit term loan and $4 million of exit revolver borrowings. RR – Recovery Rating. DIP – Debtor in possession. ABL – Asset-based loan. Source, unless otherwise noted: Company disclosure statement dated Oct. 14, 2005.

Leveraged Finance


O’Sullivan Industries, Inc. Additional Information

Cash on Filing Date $0 as of Sept. 30, 2005 (two weeks prior to filing date). Prepetition Bank Facility Commitments ABL with borrowings limited to the lesser of $40 million or ??? and a defined borrowing base with a $25 million

letter of credit sublimit (borrowing base on petition date was not provided). Prepetition Bank Facility Borrowings on Filing Date $6 million of revolver borrowings and $14.4 million letters of credit. Was the DIP a New Money Facility or Roll Up of a Prepetition Facility?

$30 million ABL DIP was a new money facility with borrowing base consisting of 90% of eligible receivables plus the lesser of 60% of cost or 85% of net orderly liquidation value of eligible inventory minus letters of credit and reserves.

Other Notable Issues A $70 million note payable to the former owner of the company, Tandy Corp., was extinguished with no distribution. This was related to taxes and was disputed.

Executory Contracts No details available. Deficiency Claims None Contingent Claims and/or Contingent Recoveries Tandy Corp., which owned the company at the time of its initial IPO, had a contingent claim of up to $70 million

related to federal tax benefits realized on a stepped-up tax basis under a tax agreement. A disputed claims reserve account was established.

Intercompany Claims No distributions. Pension Claims/Motions Pension and other employee benefit plans were assumed and continued. Postpetition Interest? Yes If Yes, Recipient Class Asset-based facility lenders. Concession Payments No Recipient and Comments Not applicable.

DIP – Debtor in possession. ABL – Asset-based loan. Source: Fitch Ratings, company disclosure statement dated Oct. 14, 2005.

Leveraged Finance


Panolam Industries International, Inc. ($ Mil., Except Where Noted)

Issuer Profile


Fitch Industry Classification Industrial/Manufacturing Key Driver Deep Cyclical Trough Subsector Laminates Manufacturer


Prepetition Ticker Symbol Not Publicly Traded Financial Profile Petition Date Assets 402 Emergence Parent Company Panolam Industries International, Inc./ 12-Month Period Amount

Name/Ticker Private

Prepetition EBITDAa 2008 39

Bankruptcy Summary Post-Emergence EBITDA Forecast 2010 24



Low 240






Low 82




Filing — Type Chapter 11 (Prepackaged) Petition Date Versus Emergence Date Section 363 Asset Sale by Debtor No Voluntary or Involuntary Filing Voluntary


Total Debt 344 171





Events Leading Up to Bankruptcy (or Contributing Factors) The downturn in the construction industry during the preceding 2008 credit crisis had a material adverse effect on cash flows. A reduction in new construction, and aftermarket renovation in turn, resulted in lower demand for decorative laminates and led to a decline in revenues. Panolam Industries International, Inc. (Panolam) received a notice of default from the agent for the lenders under its senior credit facility in February 2009. The company entered into a forbearance agreement with lenders in March 2009, which required the company to deliver an excess cash flow payment on June 30, 2009, related to the year ended Dec. 31, 2008. Panolam subsequently defaulted on the forbearance agreement and additionally did not make the regularly scheduled interest payment on June 30, 2009. Negotiations with credit agreement lenders and holders of the senior subordinated notes due 2013 led to a restructuring support agreement in advance of the bankruptcy filing.

Valuation Estimate Summary Fundamental Estimate of Going Concern Enterprise Value The third-party valuation advisor estimated a going concern enterprise value in the range of $240 million–$270 million. The advisor used a combined valuation approach using discounted cash flows and comparable public company analysis. Using these methods, the company projected its 2009 stockholders’ equity to be $81.7 million. The discount rate, multiple and peer names were not provided. The advisor considered management’s financial forecast, which included the EBITDA estimates below: ($ Mil.) 2010 2011 2012 2013 EBITDA 23.7 31 38.9 41.6 Liquidation Value Alternative The hypothetical Chapter 7 liquidation value alternative resulted in estimated net liquidation proceeds of $89.9 million–$173.9 million. The company discounted balance sheet book values as of June 30, 2009 in the estimate. The low liquidation value estimate of $89.9 million would have led to approximately 45.5% recovery on secured claims, while the high estimate of $173.9 million would have resulted in 88.0% recovery. Subordinated and other unsecured claims did not experience any recovery under either hypothetical scenario. The largest sources of asset value were cash of $45 million at 100% of book value, and PP&E of $209 million estimated to realize 20%–40% of book value in liquidation. The process was assumed to take place over a period of four to eight months. aSource is 10-K for year ended Dec. 31, 2008. Source, unless otherwise noted: Company disclosure statement dated Sept. 30, 2009.

Leveraged Finance


Panolam Industries International, Inc. (Continued) Estimated Recoveries for Select Claims ($ Mil., Except Where Noted)





Secured Notes

Unsecured Notes

Subordinated Notes

New Equity

Options/ Warrants

DIP and Priority Administrative, Priority Non-Tax Claims

10 100.0 RR1 10 — — — — —

Secured Senior Lender Credit Agreement Revolver Claims

26 100.0 RR1 20 6 — — — —

Secured Senior Lender Credit Agreement Term Claimsa

143 100.0 RR1 2 141 — — — —

Secured Senior Noteholder Credit Agreement Claimsb

25 100.0 RR1 — 25 — — — —

Secured Other Secured Claims 0 100.0 RR1 — — — — — — Subordinated 10.75% Senior Subordinated Notes

due 2013 Claims 151 49.0 RR4 — — — — 74 —


100.0 RR1 — — — — — —

Equity Equity Interests in Holdings Not Available

0.0 RR6 — — — — — 2




0 — — — — — — — —

Claim Seniority Claim Type Description DIP and Priority Administrative, Priority Non-Tax

Claims • The priority non-tax claims were unimpaired by the plan. • Approximately $10 million was reserved for administrative claims.

Secured Senior Lender Credit Agreement Revolver Claims

• Claimants received cash defined in the intercreditor distribution adjustment, pro rata share of net excess cash, pro rata amended and restated revolver notes distributable to senior lenders and pro rata cash.

• After restructuring, outstanding revolving loans were decreased to $5.9 million from approximately $25.9 million.

Secured Senior Lender Credit Agreement Term Claimsa

• Claimants received pro rata share of net excess cash, amended and restated term notes distributable to senior lenders and cash.

Secured Senior Noteholder Credit Agreement Claimsb

• Comprised of $25 million in aggregate principal amount of the term loan plus all accrued and unpaid interest and all other obligations attributable to the noteholder credit agreement claims.

• Distributions were paid out in a pro rata distribution of $25 million new second-lien term notes. Secured Other Secured Claims • Other secured claims were unimpaired by the bankruptcy. Subordinated 10.75% Senior Subordinated

Notes due 2013 Claims • Holders received 90% of newly issued common equity, which resulted in company-estimated debt recovery of

approximately 49%. • 7.5% of new equity was allocated to the management incentive plan.

Unsecured General Unsecured Claims • General unsecured claims were unimpaired by the plan. • Distributions made in cash in the ordinary course of business unless a separate agreement pay in advance of

the plan effective date was reached with authority from the bankruptcy court. Equity Equity Interests in Holdings • All section 510(b) claims were extinguished as immaterial. aAccounts for all non-crossover senior lenders. bPortion of crossover senior lenders that received new second-lien term notes. RR – Recovery Rating. DIP – Debtor in possession. Source, unless otherwise noted: Company disclosure statement dated Sept. 30, 2009.

Leveraged Finance


Panolam Industries International, Inc. (Continued) Additional Information

Cash on Filing Date $45.7 million prior to fees and minimum cash balance requirement; $22.1 million available for debt paydown. Prepetition Bank Facility Commitments $30 million revolving credit facility; $167.6 million existing term loans. Prepetition Bank Facility Borrowings on Filing Date $25.9 million borrowed under the revolving credit facility $4.1 million letters of credit; $167.6 million existing term

loans. Was the DIP a New Money Facility or Roll Up of a Prepetition Facility? There was no DIP facility. Other Notable Issues Not available. Executory Contracts Customer programs, employee programs and insurance contracts were assumed. Deficiency Claims None; secured lenders paid in full. Contingent Claims and/or Contingent Recoveries Contingent recoveries included recoveries for the prepetition equityholders who exchanged their equity interests

for warrants for 2.5% of the equity of the reorganized holding company, exercisable upon a change of control. Contingent claims included disputed claims.

Intercompany Claims Unimpaired; deemed to accept the plan of reorganization. Pension Claims/Motions Not available. Postpetition Interest? No If Yes, Recipient Class Not applicable. Concession Payments Yes

Recipient and Comments General unsecured trade claims were unimpaired and old equity holders received contingent warrants for 2.5% of the new stock exercisable upon a change in control.

DIP – Debtor in possession. Source: Fitch Ratings, company disclosure statement dated Sept. 30, 2009.

Leveraged Finance


Propex Inc. ($ Mil., Except Where Noted)

Issuer Profile Key Drivers of Bankruptcy Filing Fitch Industry Classification Industrial/Manufacturing Key Driver Deep Cyclical Trough Subsector Fabric Manufacturer for Carpet Backing and

Fibers for Automotitive, Concrete Reinforcement, Bedding, etc.


Prepetition Ticker Symbol Privately Held

Financial Profile Petition Date Assets 610 Emergence Parent Company Propex Inc./ 12-Month Period Amount

Name/Ticker Privately Held (New Owner)

Prepetition EBITDAa 12/31/06 50

Bankruptcy Summary Post-Emergence EBITDA Forecast — Not Applicable



Low 86

Court District Eastern District of Tennessee





Low 0




Filing — Type Chapter 11 Section 363 Asset Sale by Debtor Yes — Sale of Substantially All Assets (as

Liquidation)




Total Debt 380 Not Applicable

Resolution Section 363 Sale and Liquidating Plan




Events Leading Up to Bankruptcy (or Contributing Factors) Propex became highly leveraged as a result of debt-funded acquisitions, including the acquisition of Amoco’s fabric entities for $340 million in 2004 and the purchase of SI Concrete Systems Corporation (SI) for $232.6 million in January 2006. The leverage became unsustainable following a significant downturn in the housing and auto markets that reduced demand for industrial and auto products, concrete and furnishings. At the same time, increases in oil prices led to higher costs for polypropylene resin, the company’s primary raw material, and these costs were difficult to pass through to customers because of competition from foreign imports. Acquisition-related debt issued included $150 million of 10% notes for the Amoco acquisition and new credit facility to fund most of the SI purchase. There were credit facility covenant violations in the fourth quarter of 2006, and it was amended in January 2007 to provide relief for one year. Eventually there were more defaults, and lenders refused to provide further access to the revolving credit facility. The company was unable to refinance the credit facility and had insufficient liquidity to fund its business outside of bankruptcy.

Valuation Estimate Summary Sum of Asset Sale Proceeds Determined Estimated Value Most of the company’s assets were sold in an auction process for $82 million to Xerxes Foreign Holding Corp., an affiliate of Wayzata Investments, which was also the 2009 debtor in possession (DIP) lender. The Xerxes sale included assets as well as most of the executory contracts and leases that were assumed and needed to continue to do business. The bankruptcy court approved the sale of all assets on March 27, 2009 following an auction with three bidders, and the Xerxes sale closed on April 24, 2009. The new owner continued to operate Propex as a going concern. In addition, an Alto, GA facility was separately sold for $3.1 million, and miscellaneous assets were sold for $500,000 prior to the court auction sale.

Liquidation Value Alternative There was no Chapter 7 liquidation valuation. aSource is 10-K for year ended Dec. 31, 2006. Source, unless otherwise noted: Company disclosure statement for the first amended joint plan of liquidation dated July 10, 2009.

Leveraged Finance


Propex Inc. (Continued) Estimated Recoveries for Select Claims ($ Mil., Except Where Noted)





Secured Notes

Unsecured Notes

Subordinated Notes

New Equity

Options/ Warrants

DIP and Priority $60 Million DIP 33 100.0 RR1 33.00 — — — — — Secured $230 Million Credit Facility 230 21.3 RR5 49.00 — — — — —

Unsecured $150 Million 10% Notes due December 2012 152 2.0 RR6 3.00 — — — — —

Unsecured General Unsecured Claims 25–60 2.0 RR6 0.45 — — — — — Equity Holding Company Interests 33–54 0.0 RR6 — — — — — —

Estimated Claims 415 — Recoveries 85.00 0 0 0 0 0



0 — — — — — — —

Claim Seniority Claim Type Description DIP and Priority $60 Million DIP • The initial DIP was used to fund operations and was secured by first-priority senior priming liens on all

assets, excluding avoidance actions. • The company was unable to obtain an exit facility prior to the expiration of the inital DIP facility, and this

difficulty ultimately led to a 2009 DIP replacement facility that provided for the sale of all assets rather than reorganization as an independent going concern.

• The replacement DIP also added 100% of the stock of foreign subsidiaries to the DIP collateral package. • In January 2009, a payoff motion was filed to permit payoff of the $33 million of outstanding loans under

the initial DIP. Secured $230 Million Credit Facility • Lenders received distributions totaling more than $49 million using proceeds of the asset sale and waived

the remaining $180 million of their deficiency claim. • The waiver of the remaining claim permitted $4.8 million cash to remain in the estate. • Petition date borrowings included $205 million under the term loan, $20 million of revolver borrowings and

$5.96 million of letters of credit, of which $4.87 million was drawn following the petition date. Unsecured $150 Million 10% Notes due

December 2012 • As a result of a settlement and stipulation, secured creditors agreed to leave cash in the estate from the

asset sale, including $600,000 plus 3% of the net cash proceeds that would otherwise be remitted to the secured creditors, plus any funds remaining out of the $4.2 million DIP carveout, plus $500,000 success fee for the restructuring advisor.

• The estimated unsecured recovery was 1.7%–2.0%. However, it was uncertain what unsecured creditors would actually receive following the liquidating trust’s review, initiation and prosecution of causes of action and/or claim objections. It was considered unlikely that recoveries would exceed 3%.

Unsecured General Unsecured Claims • As a result of a settlement and stipulation, secured creditors agreed to leave cash in the estate from the asset sale, including $0.6 million plus 3% of the net cash proceeds that would otherwise be remitted to the secured creditors plus any funds remaining out of the $4.2 million DIP carveout, plus $500,000 success fee for the restructuring advisor.

• The estimated unsecured recovery was 1.7%–2.0%. However it was uncertain what unsecured creditors would actually receive following the liquidating trust’s review, initiation and prosecution of causes of action and or claim objections. It was considered unlikely that recoveries would exceed 3%.

Equity Holding Company Interests • $0 recovery. • Deemed to have rejected the plan of reorganization.

RR – Recovery Rating. DIP – Debtor in possession. Source, unless otherwise noted: Company disclosure statement for the first amended joint plan of liquidation dated July 10, 2009.

Leveraged Finance


Propex Inc. (Continued) Additional Information

Cash on Filing Date Not available. $22.2 million as of Feb. 3, 2008. Prepetition Bank Facility Commitments $50 million revolver (no longer available for borrowings due to defaults prior to the filing date) and $205 million

term loan. Prepetition Bank Facility Borrowings on Filing Date $205 million under the term loan, $20 million of revolver borrowings and $5.96 million of letters of credit, of which

$4.87 million was drawn following the petition date. Was the DIP a New Money Facility or Roll Up of a Prepetition Facility?

The $60 million DIP was a new money facility. The initial DIP was replaced with a second $65 million DIP in 2009 that was provided by Wayzata Investment Partners, an affiliate of the purchaser of substantially all assets.

Other Notable Issues None Executory Contracts Various lease rejections, including office leases in Tennessee and Georgia, some lift truck and vehicle leases,

etc. Other real estate leases were assumed by the buyer, Xerxes Foreign Holding Corp. Deficiency Claims Waived by the secured facility lenders. Contingent Claims and/or Contingent Recoveries Cause of action proceeds were contingent recoveries, disputed claims included retirement benefit claims and IRS

claim, etc. Intercompany Claims Not available. Pension Claims/Motions Not available. Postpetition Interest? No If Yes, Recipient Class Not applicable. Concession Payments Yes Recipient and Comments Unsecured claims.

DIP – Debtor in possession. Source: Fitch Ratings, company disclosure statement dated July 10, 2009.

0102030405060708090

100(% of Par)

Data Source: Fitch Ratings, Advantage Data.

Bond Price History — Propex Inc.($150 million 10% Senior Notes due 2012)

Filing Date: 01/18/08Confirmation Date: 08/21/09

Leveraged Finance


Liquidation Value Alternative Based on a discount to asset book values as of March 31, 2012, and resulted in estimated gross liquidation proceeds of $88.6 million to $155.8 million. The percentage of book value used for assets included: • Cash of $11.6 million valued at 100% of book value • Accounts receivable of $23.5 million at 60%–80% • Property and equipment of $109 million valued at 10%–50% • Land and buildings of $72 million valued at 60%–80% aAs calculated for the first-lien credit facility covenant compliance test. WACC – Weighted average cost of capital. Source, unless otherwise noted: Disclosure statement dated April 11, 2012. Note: This is an update of a case study originally published Feb. 14, 2013.

Reddy Ice Holdings, Inc. ($ Mil., Except Where Noted)

Issuer Profile Fitch Industry Classification Food, Beverage and Tobacco Subsector Manufactures and Distributes Ice Prepetition Ticker Symbol RDDY (Beginning 12/31/11) Petition Date Assets 434 Emergence Parent Company Name/Ticker Reddy Ice/Not Publicly Traded

Bankruptcy Summary Did All Entities in the Group File? Yes Plan Proposed by Debtor Court District Texas — Northern Substantive Consolidation No Petition Date 4/12/12 Confirmation or Conversion Date 5/22/12 Effective Date 5/31/12 Duration (Months) 1 Filing — Type Chapter 11 (Prearranged/Negotiated) Section 363 Asset Sale by Debtor No Voluntary or Involuntary Filing Voluntary Postconfirmation Liquidating Trust No Resolution Emerged/Reorganized (Private)

Key Drivers of Bankruptcy Filing Key Driver Deep Cyclical Trough Key Driver Untenable Capital Structure

Financial Profile 12-Month Period Amount Prepetition EBITDAª 12/31/11 44 Post-Emergence EBITDA Forecast 12/31/13 66 Enterprise Value (EV) Range (or Asset Value) Low 383 High 434 Midpoint EV 409 Equity Value Range (Including Cash on Hand) Low 105 High 156 Midpoint EV/Post-Emergence EBITDA Estimate (x) 6.2

Events Leading Up to Bankruptcy (or Contributing Factors) Reddy Ice became highly leveraged partially as a result of an acquisitive business strategy that was followed by declines in cash flow. The company made 78 acquisitions of smaller ice producers in the 10 years prior to the bankruptcy. In the few years prior to the bankruptcy filing, Reddy Ice’s business and the ice industry in general was adversely impacted by macroeconomic factors such as reduced consumer demand, fluctuating and generally higher commodity prices and the reduced availability of credit. The company had a net loss of $69.5 million for the year ended Dec. 31, 2011. In 2011, as EBITDA declined, Reddy Ice began to explore alternatives to address its highly leveraged capital structure. An informal committee of the largest holders of first- and second-lien notes was formed to negotiate the terms of a restructuring of debt obligations. The restructuring plan included the acquisition of Arctic Glacier, a Canadian ice producer that had filed for bankruptcy protection in Canada for similar reasons as Reddy Ice.

Valuation Estimate Summary Discounted Cash Flow Analysis To estimate the going concern midpoint enterprise value of $409 million, the third-party valuation advisor used the discounted cash flow (DCF), comparable company and precedent transaction analyses. The DCF assumptions included: WACC Discount Rate Range (%) 14–15 The DCF analysis incorporated management’s forecasts, including the EBITDA forecast below: Assumed a tax rate of 39.3% of pretax operating profits and included the benefit of net operating loss (NOL) tax credits (amount not disclosed, Reddy Ice had $203 million of NOLs as of Dec. 31, 2011, but may be limited in using them due to the stock ownership change in restructuring). ($ Mil.) 2013 2014 2015 2016 EBITDA 66.4 70.7 74.6 77.1

Other Valuation Approaches — Comparable Company Analysis The trading multiples of undisclosed peer companies were applied to Reddy Ice’s forecasted 2012 and 2013 EBITDA of $57.2 million and $66.4 million, respectively, to estimate value in the comparable company analysis.

Petition Date Versus Emergence Date Petition Date Emergence Date Total Debt 472 327 Consolidated Leverage (x) 10.7 5.0 Debt Shed in Bankruptcy — 145 Debt Shed in Bankruptcy (%) — 31

Leveraged Finance


Reddy Ice Holdings, Inc. (Continued) Estimated Recoveries for Select Claims ($ Mil., Except Where Noted) Form of Distribution




Secured Notes

Unsecured Notes

Subordinated Notes

New Equity

Options/ Warrants

DIP or Other Administrative

$70 Million DIP Revolver 40 100.0 RR1 40 — — — — —

Secured 11.25% Senior Secured First-Lien Notes due 2015

300 100.0 RR1 — 232 — — 75 —

Secured 13.25% Second-Lien Notes due 2015

147 11–44 RR5 — — — — 20 —

Secured Reddy Ice Corp. Secured Credit Facility due 2014

0 100.0 RR1 21 — — — — —

Unsecured 10.5% Senior Discount Notes 12 50.0 RR4 5 — 1 — — — Unsecured Reddy Ice Holdings General

Unsecured Claims 73.5–130.0 0–5 RR6 0–7 — — — — —

Intercompany Reddy Ice Corp. Intercompany Note

8 100.0 RR1 — — 8 — — —

Equity Common Stock of Reddy Ice Holdings

Not Available

— — 2 — — — — —

Estimated Claims 608 — Recoveries 68 232 9 0 95 — New Borrowings at Emergencea 50 — — — — — — — Debt of Nonfiling Affiliates on

Emergence Date 0 — — — — — — —

Claim Seniority Claim Type Description DIP or Other Administrative

$70 Million DIP Revolver • Guaranteed by Reddy Ice Holdings and by any future domestic subsidiaries of Reddy Ice Corp. • The DIP facility was collateralized by first-priority liens on substantially all of Reddy Ice Corp.’s assets and had

superpriority administrative claim status. • An estimated $21 million of prepetition credit facility claims were rolled into the DIP facility.

Secured 11.25% Senior Secured First-Lien Notes due 2015

• Guaranteed by Reddy Ice Holdings and secured on a first-priority basis by liens on substantially all of the assets of Reddy Ice Corp. and Reddy Ice Holdings.

• Remained in place throughout the restructuring, with amendments to permit incremental first-lien debt to be put in place to enable the Arctic Glacier income acquisition.

• Centerbridge Investments converted $68.18 million in first-lien principal and accrued interest into preferred stock of Reddy Ice Holdings with a liquidation preference of $75 million and the remaining claim holders received new first-lien notes for 100% of their principal and interest (Centerbridge received preferred stock because the Arctic Glacier acquisition did not have close).

Secured 13.25% Second-Lien Notes due 2015

• Notes were exchanged for their ratable share of the 6,094,327 shares of common equity of reorganized Reddy Ice Holdings subject to dilution and the right to participate in the rights offering, which Reddy Ice anticipated would raise

• The second-lien recovery would have increased had the Arctic Glacier acquisition been consummated (it was not) • Deficiency claims were treated as general unsecured claims at a negotiated claim amount. • The company became majority-owned by affiliates of Centerbridge Partners as a result of the debt for equity

exchange. Secured Reddy Corp. Secured Credit

Facility due 2014 • Borrowings under the Macquarie credit facility were refinanced with borrowings under the $70 million DIP facility. • The claims were unimpaired and paid in full in cash prior to the disclosure statement date. • The credit facility was an obligation of Reddy Ice Corp. and was guaranteed by Reddy Ice Holdings.

Unsecured 10.5% Senior Discount Notes • Cancelled • Holders received $4.68 million in cash payments and promissory notes in an initial amount of $1.17 million

payable on the three-month anniversary of the consummation of the restructuring. Unsecured Reddy Ice Holdings General

Unsecured Claims • If general unsecured claim holders vote to accept the plan, then the holders of second-lien note deficiency claims

will waive their general unsecured deficiency claim and give the proceeds to the remaining general unsecured claim holders.

• If holders vote to reject the plan, they will receive no distributions. Intercompany Reddy Ice Corp. Intercompany

Note • The intercompany note payable to Reddy Ice Holdings was reinstated.

Equity Common Stock of Reddy Ice Holdings

• The common stock of Reddy Ice Holdings was cancelled. • Subject to bankruptcy court approval, existing holders of the common stock would be entitled to receive a cash

payment of approximately $0.12 per share for their shares. Holders of common stock who hold at least 25,000 shares will be entitled to elect to receive common shares of reorganized Reddy Ice Holdings in lieu of the cash payment.

• Assuming all existing shares converted into stock of reorganized Reddy Ice Holdings, holders of the existing common stock of Reddy Ice Holdings would initially hold approximately 2.0% of the equity of reorganized Reddy Ice Holdings.

aAssumes $50 million exit facility is fully drawn. bThe second-lien holders also participated in a $17.5 million rights offering on emergence. RR – Recovery Rating. DIP – Debtor in possession. Source, unless otherwise noted: Disclosure statement dated April 11, 2012. Note: This is an update of a case study originally published Feb. 14, 2013.

Leveraged Finance


Reddy Ice Holdings, Inc. (Continued) Additional Information Cash on Filing Date $11.2 million at Reddy Ice Corp. as per the quarterly operating statement for the period April 12, 2012–

June 30, 2012. Prepetition Bank Facility Commitments $50 million secured revolving credit facility. Prepetition Bank Facility Borrowings on Filing Date There was $20.7 million drawn under the $50 million revolving credit facility and no remaining availability as of

March 30, 2012. Was the DIP a New Money Facility or Roll Up of a Prepetition Facility?

The DIP was partially a new money facility and partially a roll up of borrowings under the $50 million revolving credit facility.

Other Notable Issues Attempt to merge with Arctic Glacier did not proceed. Executory Contracts Not disclosed. Deficiency Claims Yes, second-lien debt deficiency claims were treated as general unsecured claims at a negotiated value, and

would be waived if general unsecured claimholders vote to accept the plan. Contingent Claims No material contingent claims disclosed. Intercompany Claims The $8 million intercompany note was reinstated. Pension Claims/Motions Except as otherwise described in the plan of reorganization, retirement benefits and other employee plans will

be continued. Postpetition Interest? Yes If Yes, Recipient Class Senior secured. Concession Payments Yes Recipient Unsecured debt and equity holders.

DIP – Debtor in possession. Source, unless otherwise noted: Disclosure statement dated April 11, 2012. Note: This is an update of a case study originally published Feb. 14, 2013.

70

80

90

100

110

120

Reddy Ice Holdings Inc. — Bond Price History($300 million 11.25% Senior Secured Notes due 2015)(% of Par)

Source: Bloomberg, Fitch Ratings.



Leveraged Finance


Simmons Company ($ Mil., Except Where Noted)

Issuer Profile Key Drivers of Bankruptcy Filing Fitch Industry Classification Industrial/Manufacturing Key Driver Deep Cyclical Trough Subsector Bedding Manufacturer Key Driver Untenable Capital Structure Prepetition Ticker Symbol N.A. Financial Profile Petition Date Assets 896 Emergence Parent Company Simmons Company/ 12-Month Period Amount Name/Ticker Private Prepetition EBITDAb December 2008 84

Bankruptcy Summary Post-Emergence EBITDA Forecast December 2010 121

Did All Entities in the Group File?a No Enterprise Value (EV) Range (or Asset Value Range) Plan Proposed by Debtor Low 758 Court District Delaware High 758 Substantive Consolidation No Midpoint EV (Value) 758 Petition Date 11/16/09 Equity Value Range Confirmation or Conversion Date 1/5/10 Low 308 Effective Date 1/21/10 High 308 Duration (Months) 2 Midpoint EV/Post-Emergence EBITDA Estimate (x) 6.3 Filing — Type Chapter 11 (Prepackaged) Petition Date Versus Emergence Date Section 363 Asset Sale by Debtor No Voluntary or Involuntary Filing Voluntary

Petition Date Emergence Date

Postconfirmation Liquidating Trust No Total Debt 1,000 450 Resolution Acquired, Merged or Sold Consolidated Leverage (x) 11.9 3.7 Debt Shed in Bankruptcy

550


55

Events Leading Up to Bankruptcy (or Contributing Factors) In 2003 Thomas H. Lee Partners acquired Simmons Company from Fenway Partners for $1.1 billion consisting of $327 million of equity and $745 million in new debt. Several years after this leveraging transaction, financial difficulties resulted from the downturn in North American economy beginning in the second half of 2007 and its significant impact on demand for products related to the housing market, consumer confidence and consumer financing, as well as a significant increase in raw material costs and diesel fuel costs during 2008. The adverse impact of the weak economy on bedding purchases accelerated late in the third quarter of 2008. Industrywide sales dropped by an estimated 20% in late 2008 and roughly 10% in 2009. These drops were unprecedented in the industry, with only one year of sales decline in the previous 33 years. In fiscal 2008 Simmons experienced a 15% sales decline coupled with a significant increase in raw material costs and the Chapter 11 filing of a major customer. Simmons’ EBITDA declined by 26% in fiscal 2008 as a result. This led to a leverage covenant breach (4.5x EBITDA leverage for the period ending September 2008) in the Simmons Bedding Co. credit agreement, which ripened into an event of default on Nov. 12, 2008. A restructuring advisor was engaged, and the advisor started a sales process with potential strategic and financial buyers in December 2008.

Valuation Estimate Summary Sales Proceeds from Going Concern Sale of All Assets The $758 million value was established through a sale of the company. The purchasers acquired the company for $758 million, with equity of $310 million and exit financing of $425 million and reinstated debt of approximately $25 million. In the transaction, 100% of Simmons Bedding and all of its U.S. and foreign subsidiaries were acquired by certain affiliates of Ares Management, L.P. and Teachers’ Private Capital. As of the day of the filing, Simmons Bedding had approximately $50 million of cash on hand and continued to satisfy customary obligations associated with its daily operations throughout the confirmation process. Simmons arranged for a $35 million DIP facility. Ares Management owned rival mattress company Serta, which it planned to merge with Simmons Bedding. The sale was the result of an active bidding process for the company. Liquidation Value Alternative The Chapter 7 hypothetical liquidation valuation was completed in August 2009. The analysis showed that total proceeds available for distribution was in the range of $182.0 million–$312.6 million based upon discounts to the book value of assets on the balance sheet. These figures were reduced by the projected total wind-down costs in the $20.5 million–$25.7 million range, resulting in $161.4 million–$286.9 million of estimated net proceeds available after wind-down costs. For each scenario, the net proceeds available after claims of secured creditors was zero given the total secured creditor claims totaled $553.2 million, which was lower than the value that resulted from the Chapter 11 plan sale of all assets. aExcludes foreign entities. bSource is SEC form 10-K for 2008. N.A. – Not applicable. Source, unless otherwise noted: Company disclosure statement dated Oct. 13, 2009.

Leveraged Finance


Simmons Company (Continued) Estimated Recoveries for Select Claims ($ Mil., Except Where Noted)





Secured Notes

Unsecured Notes

Subordinated Notes

New Equity

Options/ Warrants

DIP and Priority Administrative and Priority 42 100.0 RR1 42 — — — — — Secured Simmons Bedding Co. (SBC) Credit

Agreement Claims 542 100.0 RR1 542 — — — — —

Secured 7.875% SBC Senior Subordinated Notes due 2014 Claims

222 83.4 RR2 185 — — — — —

Unsecured General Unsecured Claims 57 100.0 RR1 — — — — — — Subordinated 10% Holdco (Discount) Notes due

2014 299 3.3 RR6 10 — — — — —

Equity Equity Interest in SBC 0 0.0 RR6 — — — — — — Equity Equity Interest in Bedding Holdco 10 N.A. RR6 — — — — — —

Estimated Claims 1,172 — Recoveries 779 0 0 0 0 0



0 — — — — — — — —

Claim Seniority Claim Type Description DIP and Priority Administrative and Priority • Includes DIP claims of $35 million. Secured SBC Credit Agreement Claims • Borrowings consisted of $64.5 million under the revolver, a $465 million Tranche D term loan and

$10.3 million letters of credit plus $2.5 million of prepetition accrued and unpaid interest. • Letters of credit were replaced with letters of credit under DIP or the exit facilities.

Secured 7.875% SBC Senior Subordinated Notes due 2014 Claims

• $200 million of principal plus interest accrued and unpaid through the petition date. • Final recoveries expected to be in the $185 million–$190 million range but were to be reduced by the lesser

of one-third of the amount of restructuring expenses exceeding $42.1 million, or $5 million. In addition, if restructuring expenses were less than $37.1 million, such excess would be distributed in cash to the holdco noteholders.

Unsecured General Unsecured Claims • Paid in full in cash according to existing terms in the ordinary course of business after the plan effective date to the extent not covered by insurance.

• Included accounts payable, sales incentive claims, royalty claims, THL Managers V, LLC management fee, warranty claims and freight claims.

Subordinated 10% Holdco (Discount) Notes due 2014

• Under the plan, each holder received its pro rata share of between $10 million and $15 million in cash, depending on the amount of restructuring expenses incurred by the debtors.

• Claims included $267 million of principal and interest under the holdco notes plus the remaining unpaid claim on the SBC 7.875% notes.

• Eligible holders were also able to invest in new Class A units up to a maximum of 6.9% of the new Class A units.

Equity Equity Interest in SBC • Cancelled • No distributions.

Equity Equity Interest in Bedding Holdco • The equity interests in Bedding holdco were cancelled as of the effective date.

RR – Recovery Rating. DIP – Debtor in possession. N.A. – Not available. Source, unless otherwise noted: Company disclosure statement dated Oct. 13, 2009.

Leveraged Finance


Simmons Company (Continued) Additional Information

Cash on Filing Date $50 million as per company press release dated Nov. 16, 2009. Prepetition Bank Facility Commitments $75 million revolver facility and $465 million of Tranche D term loans. Prepetition Bank Facility Borrowings on Filing Date $65 million revolver borrowings and $465 million of term loans. Was the DIP a New Money Facility or Roll Up of a Prepetition Facility?

New money facility.

Other Notable Issues None Executory Contracts Employee benefit arrangements, union contract agreements and insurance policies were assumed. Deficiency Claims No, secured lenders were paid in full. Contingent Claims and/or Contingent Recoveries Disputed claims. Intercompany Claims None Pension Claims/Motions Pension plans were assumed and continued. The plans were underfunded by approximately $2.9 million. Postpetition Interest? No If Yes, Recipient Class Not applicable. Concession Payments Yes, if certain restructuring cost thresholds were not exceeded. Recipient and Comments Holdco notes.

DIP – Debtor in possession. Source: Fitch Ratings, company disclosure statement dated Oct. 13, 2009.

Leveraged Finance


Solyndra LLCa ($ Mil., Except Where Noted)

Issuer Profile Key Drivers of Bankruptcy Filing Fitch Industry Classification Industrial/Manufacturing Key Driver Deep Cyclical Trough Subsector Manufactures Solar Panels and Power

Systems


Prepetition Ticker Symbol Privately Held Financial Profile Petition Date Assets 869 Emergence Parent Company 360 Degree Solar Holding (Parent)/

12-Month Period Amount Name/Ticker Liquidated Prepetition EBITDA Not

Available Negative Cash

Flow as Start-Up

Bankruptcy Summary Post-Emergence EBITDA Forecast — Not Applicable



Low 117






Low 0





(as Liquidation)




Total Debtb 900 0

Resolution Liquidation (Under Chapter 11)

Consolidated Leverage (x) — —



Events Leading Up to Bankruptcy (or Contributing Factors) Solyndra LLC was formed in 2005 and initially raised preferred stock capital from private investors in eight rounds as well as a commercial bank funding to construct its first fabrication facility (Fab 1). This facility started commercial operation in 2008. Additional capital was raised in 2009 from the U.S. Department of Energy (DOE) loan guarantee program to fund construction of a second plant facility (Fab 2). Solyndra was unable to compete with foreign, state-sponsored manufacturers of photovoltaic solar panel systems that flooded the market with lower-priced panels or meet production milestones, and the oversupply of panels led to significant price cuts in the product. There was a concurrent reduction of European government subsidies for renewables, and weakness in demand starting in 2011 that worsened the negative cash flow. The company cancelled a planned IPO in June 2010. An out-of-court restructuring was completed in February 2011. In this restructuring, Solyndra received $75 million of new debt (first-lien Tranche A), the DOE loan was split into two tranches (second-lien Tranche B and third-lien Tranche D), notes were exchanged for Tranche E debt, preferred stock was converted to common equity and manufacturing was consolidated at the Fab 2 facility. This restructuring envisioned a further $75 million Tranche C debt issuance to fund operations until the company could become cash flow positive. However, Solyndra was unable to raise this debt. All manufacturing operations were suspended and the vast majority of the workforce was terminated on Aug. 31, 2011, and a week later the company filed. A few weeks after the filing, there was an FBI raid and investigation regarding the circumstances of the DOE loan, accuracy of financial statements and inflated forecasts. The CEO and CFO invoked their Fifth Amendment rights and declined to answer questions, a trustee was appointed and liquidation followed.

Valuation Estimate Summary Sum of Asset Sale Proceeds in Chapter 11 Liquidation Analysis Provided Estimate of Value The disclosure statement included a liquidation valuation based on the book value of assets plus approximately $10 million contributed by the plan sponsors. The valuation assumed a plan effective date of Sept. 30, 2012. The vast majority of the liquidation value remaining on the valuation date was from the value of buildings and land. The largest contributor to value was the $90.3 million sale of the Fremont, CA facility. Proceeds of the property sale to Seagate Technology, LLC were received in August 2012. There was $132,000 of cash and a high-end range estimate of the value of intellectual property of $1.6 million also contributing to asset sale value. There had been prior bankruptcy court-supervised sales of noncore assets in October through June 2012, which resulted in proceeds of roughly $13 million. In addition, the plan sponsors contributed approximately $10 million for uses including distributions to employee Worker Adjustment and Retraining Notification Act claimants, payment of certain administrative and priority costs and certain general unsecured claims. The company initially tried to sell its assets on a turnkey going concern basis. However, no bids were received and the company moved forward with dismantling the manufacturing facilities in an orderly liquidation. The parent company, 360 Degree Solar Holdings Inc., exited bankruptcy with net operating loss carryforwards of as much as $975 million as per a Bloomberg release dated Oct. 23, 2012. Liquidation Value Alternative

The Chapter 7 liquidation alternative valuation analysis resulted in estimated proceeds in the range of $43.7 million–$86.4 million. The valuation assumed that a case conversion to a Chapter 7 liquidation occurred on Oct. 19, 2012. The value of the PP&E asset sales was lower and was the key difference between the Chapter 11 liquidation proceeds estimate. In addition, the estimate of administrative and priority costs was higher under this alternative at $25 million, compared with $22 million estimated under the Chapter 11 plan, as a result of incremental costs associated with liquidation under Chapter 7. aChanged name to 360 Degree Solar Holdings, Inc. on June 28, 2011. bPetition date debt consisted of $783 million of secured debt and estimated unsecured debt in the $90 million–$135 million range. Source, unless otherwise noted: Amended company disclosure statement dated Sept 7, 2012.

Leveraged Finance


Solyndra LLCa (Continued) Estimated Recoveries for Select Claims ($ Mil., Except Where Noted)





Secured Notes

Unsecured Notes

Subordinated Notes

New Equity

Options/ Warrants

DIP and Priority Administrative Expenses, Priority and Tax Claims

22 100.0 RR1 22 — — — — —

Secured $75 Million Tranche A 73.4 100.0 RR1 73 — — — — —

Secured $150 Million Tranche B Facility Claims (DOE)

143 14.0 RR5 20 — — — — —

Secured $385 Million Tranche D Claims (DOE)

385 ≥ 0.0 RR6 — — — — — —

Secured Prepetition Tranche E Claims 187 ≥ 0.0 RR6 — — — — — —

Unsecured 360 Degree Holdings (Parent) General Unsecured Claims

27 3.0 RR6 1 — — — — —

Unsecured Solyndra General Unsecured Claims

90–135 2.5–6.0 RR6 2 — — — — —

Equity Interests in Solyndra Not

Available 0.0 RR6 — — — — — —




0 — — — — — — — —

Claim Seniority Claim Type Description DIP and Priority Administrative Expenses, Priority

and Tax Claims • Paid in full in cash. • Included an estimated $10.6 million of remaining administrative expenses, $1 million of tax claims and

$4.5 million of allowed priority claims, including $3.5 million of Workers Adjustment and Retraining Notification Act claims.

• There was a $7 million DIP facility, which was expected to be drawn at the time of emergence and paid in full in cash.

Secured $75 Million Tranche A • Claims reflect principal balance plus prepetition accrued interest of $3.4 million. • Per plan settlement, the claim was reduced by $3.175 million to account for the Solyndra settlement fund loan

and the Solyndra settlement trust for the benefit of general unsecured claims. • This tranche was initiated in the out-of-court restructuring and became senior to the DOE loans Tranches B

and D. • Recovery rate is Fitch estimate based on proceeds from asset sales.

Secured $150 Million Tranche B Facility claims (DOE)

• Cash distributions. • Recovery is Fitch estimate based on sum of asset sale proceeds and assumes more senior claims are paid in

full. Secured $385 Million Tranche D Claims

(DOE) • Recoveries, if any, paid in cash with liquidation proceeds depending on the outcome of the liquidation efforts.

Secured Prepetition Tranche E Claims • Recoveries, if any, dependent on the outcome of liquidation efforts. • This tranche was initiated by a notes conversion in the out-of-court restructuring.

Unsecured 360 Degree Holdings (Parent) General Unsecured Claims

• Received 3% recovery distributions from the holdings settlement fund. • Waived any rights to distributions from the Solyndra settlement fund and trust avoidance claims provided

Solyndra general unsecured creditor distributions do not exceed 10%. Unsecured Solyndra General Unsecured

Claims • Received $3 million cash recovery and $175,000 for professional fees.

Equity Interests in Solyndra • No recoveries. • Deemed to have rejected the plan.

aChanged name to 360 Degree Solar Holdings, Inc. on June 28, 2011. RR – Recovery Rating. DIP – Debtor in possession. DOE – U.S. Department of Energy. Source, unless otherwise noted: Amended company disclosure statement dated Sept 7, 2012.

Leveraged Finance


Solyndra LLCa (Continued) Additional Information

Cash on Filing Date Not available. Prepetition Bank Facility Commitments $73 million Tranche A first-lien debt, $142.8 million Tranche B second-lien debt, $385 million Tranche D third-

lien debt and $186 million Tranche E third-lien debt. Prepetition Bank Facility Borrowings on Filing Date The $4 million DIP was a new money facility and was increased to $7 million in September 2012. Was the DIP a New Money Facility or Roll Up of a Prepetition Facility?

New money.

Other Notable Issues There were allegations that Solyndra misrepresented its financials in order to obtain a $535 million U.S. Department of Energy loan guarantee.

Executory Contracts Not available. Deficiency Claims None Contingent Claims and/or Contingent Recoveries Worker Adjustment and Retraining Notification (WARN) Act class action claims of up to $15 million. Intercompany Claims Not available. Pension Claims/Motions None Postpetition Interest? No If Yes, Recipient Class Not applicable. Concession Payments Yes Recipient and Comments Class action claimants under WARN Act asserting claims of up to $15 million will have access to a $3.5 million

WARN settlement loan funded by the plan sponsors, general unsecured claims of holdings (parent) and of Solyndra.

aChanged name to 360 Degree Solar Holdings, Inc. on June 28, 2011. DIP – Debtor in possession. Source: Fitch Ratings, amended company disclosure statement dated Sept. 7, 2012.

Leveraged Finance


True Temper Sports, Inc. ($ Mil., Except Where Noted)

Issuer Profile Key Drivers of Bankruptcy Filing Fitch Industry Classification Industrial/Manufacturing Key Driver Deep Cyclical Trough Subsector Produces Steel and Graphite Shafts for


Golf Club OEMs Prepetition Ticker Symbol Privately Held

Financial Profile Petition Date Assets 199 Emergence Parent Company New True Temper Sports/

12-Month Period Amount Name/Ticker Privately Held Prepetition EBITDAa 12/31/08 29




Low 113






Low 79




Filing — Type Chapter 11 (Prepackaged) Petition Date Versus Emergence Date Section 363 Asset Sale by Debtor Yes — Sale of Substantially All Assets

(as Going Concern) Voluntary or Involuntary Filing Voluntary


Total Debt 275 40





Events Leading Up to Bankruptcy (or Contributing Factors) The company was highly leveraged. Financial performance declined in 2009 as a result of the confluence of the reduction in overall consumer discretionary spending in the deep recession that led to lower spending on golf clubs and a drop in orders from club manufacturer customers due to high inventory levels. There were defaults under the first-lien credit facility, the second-lien credit facility and the senior subordinate notes. The company did not make the principal payment due on its revolving credit loans or its 8.375% notes in March 2009, and a restructuring advisor was retained. After evaluating bids from potential acquirers of the assets, a standalone plan with new money investment from prepetition creditors was pursued. Secured lenders and the company agreed on a consensual restructuring in which the holder of 45% of the subordinated notes elected to invest in new equity, and the company emerged as an independent going concern.

Valuation Estimate Summary Consensual Settlement Forms Basis of Going Concern Valuation The company, participating first-lien and second-lien lenders and the plan investor reached a consensual settlement that results in an implied enterprise valuation of approximately $113 million solely for purposes of the plan. The plan investors held 45% of the senior subordinated notes, which received $0 distribution. The new money investor group included Newport Global Investors, J.P. Morgan Investment Management Inc. and Northeast Investors. The enterprise value included equity value of $79 million. This amount represents the price being paid by the plan investor to acquire the new stock and was used to make creditor distributions under the plan. The settlement was supported by the first-lien agent, the participating first-lien lenders, the participating second-lien lenders and the plan investors. Bidding Process That Led to Settlement Management made a presentation to 34 financial investors that were potentially interested in acquiring the company. Potential investors were invited to submit nonbinding indications of interest by June 3, 2009. Five terms sheets were received from potential buyers with implied enterprise valuations ranging from $52 million to $100 million. However, none of the bids provided for cash paydowns to the first-lien lenders, and all would have required the first-lien lenders to exchange old debt for new debt at a significant loss to par value. The company, its advisors and the first-lien lenders declined to move forward with any of the bids. Instead, the company negotiated the restructuring plan in the consensual settlement described above. Liquidation Value Alternative The Chapter 7 alternative hypothetical valuation estimate had a midpoint of $59.9 million. The estimate was based on percentages of asset book value as of Aug. 23, 2009. Assets and percentages applied included: • Cash of $13.1 million at 100% • Receivables of $12.8 million at 56%–68% • Inventories of $25.2 million at 71%–89% • PP&E of $15 million at 0%–15% • Intangibles of $93 million at 11%–16% aSource is 10-K. Source, unless otherwise noted: Company disclosure statement dated Sept. 30, 2009.

Leveraged Finance


True Temper Sports, Inc. (Continued) Estimated Recoveries for Select Claims ($ Mil., Except Where Noted)





Secured Notes

Unsecured Notes

Subordinated Notes

New Equity

Options/ Warrants

DIP and Priority New Money DIP 5 100.0 RR1 5 — — — — — Secured First-Lien Credit Facility due March 15,

2011 (including DIP Roll Up Portion) 102 100.0 RR1 70 32 — — — —

Secured Second-Lien Credit Facility due June 30, 2011

45 22.2 RR5 2 — — — 8 —

Unsecured $125 Million Senior Subordinated Notes 125 0.0 RR6 — — — — — — Unsecured General Unsecured Claims Not

Available ≥ 0.0 RR6 — — — — — —

Intercompany Old Equity Interests Not Available

0.0 RR6 — — — — — —




0 — — — — — — — —

Claim Seniority Claim Type Description DIP and Priority New Money DIP • Repaid with exit revolver (letters of credit replaced by exit facility letters of credit).

• Excludes roll up portion shown in line below. Secured First-Lien Credit Facility due March 15,

2011 (Including DIP Roll Up Portion) • Received $70 million cash and rolled over their remaining claim into a new term loan. • Accrued interest was also allowed; this is principal portion of claim only.

Secured Second-Lien Credit Facility due June 30, 2011

• Holders received 11.324% of the new common stock gifted from the plan investor as well as cash in an amount between $500,000 and $3 million depending on the amount of cash collateral available as of the petition date.

• Consenting second-lien lenders contributed their share of the plan cash to an account established to make distributions to holders of trade claims.

• $45 million is the principal portion of the claim only. The prepetition accrued interest was also allowed as a claim.

Unsecured $125 Million Senior Subordinated Notes • Received $0 distributions under the plan. • The holders of 45% of the senior subordinated notes invested $70 million in the new common equity and

became the new owners of the company. Unsecured General Unsecured Claims • No distributions; however, trade creditor unsecured claims were entitled to receive some distributions

from proceeds of a trade account funded by second-lien claimholders that voted to accept the plan with their portion of the second-lien claim cash distribution.

Intercompany Old Equity Interests • No distributions. • Deemed to have rejected the plan.

aIncludes letters of credit under $12.5 million exit revolver. RR – Recovery Rating. DIP – Debtor in possession. Source, unless otherwise noted: Company disclosure statement dated Sept. 30, 2009.

Leveraged Finance


True Temper Sports, Inc. (Continued) Additional Information

Cash on Filing Date — Prepetition Bank Facility Commitments $20 million revolver, $3 million letter of credit facility and $84.6 million first-lien term loan, as well as $45 million

of second-lien loan borrowings. Prepetition Bank Facility Borrowings on Filing Date $17.1 million of revolver borrowings, $1.8 million letters of credit outstanding, $84.6 million first-lien term loan

and $45 million second-lien loan. Was the DIP a New Money Facility or Roll Up of a Prepetition Facility?

$10 million new money revolving DIP and $80 million roll up DIP that refinanced the prepetition credit facility.

Other Notable Issues None Executory Contracts Collective bargaining agreement, employee agreements and insurance policies assumed. Deficiency Claims None Contingent Claims and/or Contingent Recoveries Disputed claims. Intercompany Claims Reinstated, adjusted, continued or capitalized as deemed appropriate by the company in consultation with the

plan investor. Pension Claims/Motions The pension plan was continued during bankruptcy and post-effective date. It was underfunded by

approximately $6 million–$8 million. Postpetition Interest? Not available. If Yes, Recipient Class Not available. Concession Payments Yes Recipient and Comments Second-lien lenders received an allocation of the new common stock from the plan investor. Also, second-lien

lenders that accepted the plan contributed their share of cash to an account established to pay trade creditors.

DIP – Debtor in possession. Source: Fitch Ratings, company disclosure statement dated Sept. 30, 2009.

Leveraged Finance


Wellman Inc. ($ Mil., Except Where Noted)

Issuer Profile Key Drivers of Bankruptcy Filing Fitch Industry Classification Industrial/Manufacturing Key Driver Untenable Capital Structure Subsector Manufacturing


Prepetition Ticker Symbol WLM Financial Profile Petition Date Assets 124 Emergence Parent Company

Name/Ticker Wellman/Private 12-Month Period Amount



Bankruptcy Summary Did All Entities in the Group File?a Yes



Low 176 Court District Southern District of New York

High 213



Equity Value Rangea



High 224

Duration (Months) 11

Midpoint EV/Post-Emergence EBITDA Estimate (x) 4.7 Filing — Type Chapter 11

Petition Date Versus Emergence Date Section 363 Asset Sale by Debtor Yes — Partial Sale of Assets Voluntary or Involuntary Filing Voluntary

Petition Dateb Emergence Date Postconfirmation Liquidating Trust Yes

Total Debt 600 135




465


78

Events Leading Up to Bankruptcy (or Contributing Factors) Spikes in raw material prices and unsustainably high leverage contributed to the filing. Two raw materials, PTA and MEG, account for 75% of Wellman Inc.’s total product unit costs in its polyester business. For this reason, any change in the pricing and availability of these raw materials has a correspondingly significant impact on Wellman’s profitability. Over the years leading to the bankruptcy, the market for both PTA and MEG tightened significantly, particularly in North America, as disruptions in the supply chain and increasing raw material prices caused supply to fall below demand levels. On Aug. 29, 2005, Hurricane Katrina hit the Gulf Coast, devastating regional production of PTA and MEG. The resulting shutdowns and disruptions in the supply lines caused raw material costs in North America’s polyester industry to skyrocket in the fourth quarter of 2005. By early 2006, the domestic polyester industry suffered another blow when the U.S. government mandated the phase-out of a certain gasoline additive for environmental reasons. In reaction, the price of PTA spiked again. Against this backdrop, there was oversupply of polyester. This led to low facility utilization rates and smaller profit margins. Furthermore, in 2005, Wellman experienced sizable cash outlays stemming from two unexpected events: a U.S. Department of Justice investigation into certain price-fixing allegations in the polyester fiber industry, which led Wellman to enter into certain settlements with class action plaintiffs to avoid the risk of litigation and further disruptions to its business.

Valuation Estimate Summary Going Concern Enterprise Valuation A third-party adviser provided the valuation. The reorganized company retained only one of the three key plants, the Pearl River unit, as a going concern. The valuation ranges from $176 million to $213 million, with a midpoint of $195 million. The proceeds of the Johnsville plant, which was sold as a going concern operation during bankruptcy, were used to repay DIP borrowings prior to the disclosure statement valuation and are excluded from the enterprise value. The Palmetto plant was shuttered. The equity value range is based on the as-converted value of the convertible notes at a 60% conversion rate. Liquidation Value Alternative Cash at the 100% advance rate is $1.1 million. Accounts receivable at 92% is $60 million. Inventories at 59.3% are $20.9 million. Including other miscellaneous assets, the proceeds available to DIP and second-lien lenders are $78 million. PP&E at 15.8% is $37.1 million, which is inclusively distributed to first lien. Under the liquidation scenario, the first-lien lender would recover at 16.7%, the second lien would recover at 5.5%, and the DIP would recover at 100%. aEquity value is based on an as-converted basis for the convertible notes. bTotal debt prepetition does not include $400 million unsecured industrial development bonds issued by state governments. Source, unless otherwise noted: Company disclosure statement dated Nov. 11, 2008 and Business Wire article “Wellman’s Plan of Reorganization Confirmed” (Jan. 15, 2009).

http://www.businesswire.com/news/home/20090115006211/en/Wellman%E2%80%99s-Plan-Reorganization-Confirmed

Leveraged Finance


Wellman Inc. (Continued) Estimated Recoveries for Select Claims ($ Mil., Except Where Noted)





Secured Notes

Unsecured Notes

Subordinated Notes

New Equity

Options/ Warrants

DIP and Priority DIP Facility 64 100.0 RR1 64 — — — — — Secured Revolver Facility 0 100.0 RR1 — — — — — — Secured First Lien 185 34.5 RR4 — 36 — — 53 — Secured Second Lien 265 9.3 RR6 — 24 — — 20 — Unsecured General Unsecured 65 < 1.0 RR6 — — — — — —


New Borrowings at Emergenceb 75 — — — — — — — —


Claim Seniority Claim Type Description DIP and Priority DIP facility • The allowed amount was reduced by a portion of the proceeds from the sale of the Johnsville plant (proceeds

not disclosed). The rest was paid by the cash contribution from Blackrock and Sola and the drawdown from the exit financing.

Secured Revolver Facility • $125 million outstanding was paid off by a portion of proceeds from the sale of the Johnsville plant and/or the DIP facility.

• The revolving facility was secured on the first-lien basis by all the assets except for PP&E. Secured First Lien • The total value recovered is $64 million in the form of new equity value. However, the first-lien lender also

received $36 million in convertible secured notes at the 30% conversion rate. Based on the calculation, the common stock received by the first lien is $53 million.

• The term loan facility secured on a first-lien basis by PP&E. Secured Second Lien • The total value recovered is $20 million in equity value. However, the second-lien lender received $24 million in

convertible secured notes at the 20% conversion rate. Based on the calculation, the common stock received by the first lien is $20.2 million.

• Secured on the first-lien basis by IP property and the second-lien basis by the other assets. Unsecured General Unsecured • No recovery other than potential proceeds from the distribution trust based on the outcome of certain

litigations. aBlackrock and Sola contributed $35 million in exchange for common stock and $40 million in secured convertible notes at the 50% conversion rate. The exit facility is a $35 million revolver, assumed fully drawn. RR – Recovery Rating. DIP – Debtor in possession. Source, unless otherwise noted: Company disclosure statement dated Nov. 11, 2008 and Business Wire article “Wellman’s Plan of Reorganization Confirmed” (Jan. 15, 2009).

http://www.businesswire.com/news/home/20090115006211/en/Wellman%E2%80%99s-Plan-Reorganization-Confirmed

Leveraged Finance


Wellman Inc. (Continued) Additional Information

Cash on Filing Date $1 million. Prepetition Bank Facility Commitments $225 million, of which 125 million was outstanding. Prepetition Bank Facility Borrowings on Filing Date $125 million. Was the DIP a New Money Facility or Roll Up of a Prepetition Facility?

Roll up, and was paid off by the proceeds from the sale of two plants and exit financing. The DIP facility had a commitment of $200 million and was secured on the first-lien basis on all the assets except for PP&E.

Other Notable Issues Blackrock and Sola contributed $35 million of new money in exchange for common stock and $40 million in convertible notes at the 50% conversion rate.

Executory Contracts No material executory contracts. Deficiency Claims Deficiency claims were all waived. Contingent Claims and/or Contingent Recoveries No contingent claims. Intercompany Claims No material intercompany claims. Pension Claims/Motions $24 million of unfunded liability owed to the PBGC. Postpetition Interest? No If Yes, Recipient Class Not applicable. Concession Payments Yes Recipient and Comments Second lien and general unsecured classes.

DIP – Debtor in possession. Source: Fitch Ratings, company disclosure statement dated Nov. 11, 2008.

Leveraged Finance


Wolverine Tube, Inc. ($ Mil., Except Where Noted)

Issuer Profile Key Drivers of Bankruptcy Filing Fitch Industry Classification Industrial/Manufacturing Key Driver Untenable Capital Structure Subsector Metal Manufacturing


Prepetition Ticker Symbol WLV Financial Profile Petition Date Assets 115 Emergence Parent Company

Name/Ticker Wolverine Tube/Private 12-Month Period Amount

Prepetition EBITDA 2010 7

Post-Emergence EBITDA Forecast 2011 11

Bankruptcy Summary Did All Entities in the Group File?a Yes



Low 103 Court District District of Delaware

High 113



Equity Value Range



High 70

Duration (Months) 8

Midpoint EV/Post-Emergence EBITDA Estimate (x) 9.5 Filing — Type Chapter 11

Petition Date Versus Emergence Date Section 363 Asset Sale by Debtor Yes — Partial Sale of Assets Voluntary or Involuntary Filing Voluntary


Total Debt 237 43





Events Leading Up to Bankruptcy (or Contributing Factors) Over the course of several years leading up to the bankruptcy filing, Wolverine Tube, Inc.’s (Wolverine) liquidity became increasingly constrained due to the steep rise and significant volatility in the prices of copper and other metals that are at the core of its business, the precipitous year-over-year increase in the funding obligations associated with the pension plan and the high level of interest expense relating to the secured notes. At the same time, Wolverine’s operating revenues declined due to the global economic downturn in the industries it served. As a result, the company could not pay its non-trade expenses, including interest payments on the notes and funding obligations under the pension plan.

Valuation Estimate Summary

Going Concern Enterprise Valuation The valuation is based on a statement made by chairman of Wolverine. He stated that the tangible net equity of the new company is estimated at $60 million–$70 million. Adding the new debt, Fitch calculated the EV between $110 million and $120 million. Based on management’s projection, the estimated EBITDA for fiscal years 2010–2013 is the following: ($ Mil.) 2010 2011 2012 2013 EBITDA 6.5 8.8 11.4 15

Liquidation Value Alternative The liquidation value from domestic business was estimated at $47.4 million–$63 million based on discounts to asset book value and the value from foreign subsidiaries

is estimated at $13.7 million–$20.8 million. The total estimated proceeds were $61.1 million–$83.8 million. The analysis assumed accounts receivable were liquidated at a rate of 60% of book value, inventories at 55% and PP&E at 15%.

Source, unless otherwise noted: Company disclosure statement dated April 13, 2011 and PR Newswire article “Wolverine Tube, Inc. Exits Chapter 11” (June 28, 2011).

http://www.prnewswire.com/news-releases/wolverine-tube-inc-exits-chapter-11-124672203.html

Leveraged Finance


Wolverine Tube, Inc. (Continued) Estimated Recoveries for Select Claims ($ Mil., Except Where Noted)





Secured Notes

Unsecured Notes

Subordinated Notes

New Equity

Options/ Warrants

Unsecured Administrative and Priority Claims 0.7 100.0 RR1 0.7 — — — — — Secured Secured Notes 139 66.0 RR3 — 30 — — 61.2 — Unsecured General Unsecured Claims 0.9 100.0 RR1 0.9 — — — — — Unsecured PBGC Claims 131 13.0 RR5 — — 13 — 3.8 —

Estimated Claims 272 — Recoveries 1.6 30 13 0 65.0 0

New Borrowings at Emergence — — — — — — — — —


— — — — — — — — —

Claim Seniority Claim Type Description Unsecured Administrative and Priority Claims • Paid in full in cash. Secured Secured Notes • $30 million first-lien notes plus 95% of new equity. The value of the new equity is estimated based on the

statement made by chairman of the company. Unsecured General Unsecured Claims • Paid in full in cash. Unsecured PBGC Claims • A payment schedule amounting to $13 million in present value, plus 5% of new equity. The value of the

new equity estimated based on the statement made by chairman of the company.

RR – Recovery Rating. DIP – Debtor in possession. Source, unless otherwise noted: Company disclosure statement dated April 13, 2011 and PR Newswire article “Wolverine Tube, Inc. Exits Chapter 11” (June 28, 2011).

http://www.prnewswire.com/news-releases/wolverine-tube-inc-exits-chapter-11-124672203.html

Leveraged Finance


Wolverine Tube, Inc. (Continued) Additional Information

Cash on Filing Date $20 million, $5 million being restricted. Prepetition Bank Facility Commitments The company had no bank facility. Prepetition Bank Facility Borrowings on Filing Date Not applicable. Was the DIP a New Money Facility or Roll Up of a Prepetition Facility?

Not applicable.

Other Notable Issues No Executory Contracts No material executory contracts. Deficiency Claims Waived after confirmation. Contingent Claims and/or Contingent Recoveries No material contingent claims. Intercompany Claims No material intercompany claims. Pension Claims/Motions At the time of the filing, the pension plan was 58% funded. PBGC claimed a total amount of $139 million in

various claims. The reorganization plan provided the PBGC with a payment plan amounting to $13 million in present value, plus 5% of new equity.

Postpetition Interest? No If Yes, Recipient Class Not applicable. Concession Payments Yes Recipient and Comments General unsecured claims.

DIP – Debtor in possession. Source: Fitch Ratings, company disclosure statement dated April 13, 2011.

Leveraged Finance


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