Pioneer Companies Inc, Houston TX, announced July 31 that the company and certain of its subsidiaries have filed voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court in Houston. The chemical company manufactures chlorine, caustic soda, hydrochloric acid, and related products used in a variety of applications.
"The difficult circumstances of the chemical industry since the beginning of 1999 have been well chronicled," said Michael J. Ferris, president and chief executive officer. "Our liquidity eroded to the point that, regrettably, a restructuring of our indebtedness became necessary. It is also unfortunate that the restructuring required a Chapter 11 filing, and a similar filing in Canada, to be effected. However, because the proposed restructuring plan has the support of a majority of Pioneer's senior creditors, we believe that the process will be relatively brief and will not affect operations. There will be no disruption of deliveries to customers."
The company also announced that a parallel filing under the Companies' Creditors Arrangement Act has been filed in Superior Court in Montreal, Quebec, Canada, by Pioneer's Canadian subsidiary.
Pioneer has signed an agreement with certain of its senior secured creditors that provides for restructuring and reducing the obligations owed to them. Under the agreement, the creditors will, subject to the satisfaction of certain conditions, vote in favor of a restructuring plan that provides for the exchange of approximately $552 million of outstanding indebtedness (plus accrued interest) for $250 million of new debt and 97% of the common stock of the reorganized company.
With the base of support already provided by a majority of the senior secured creditors who will be voting in favor of the proposed restructuring plan, the company is highly confident that the plan will be approved and implemented in a timely manner, according to information from Pioneer.
All obligations incurred by the company and its subsidiaries after the filings made today will constitute a priority claim against the Pioneer assets and will be paid in accordance with standard industry terms. The proposed plan provides that all of Pioneer's outstanding common stock and preferred stock will be cancelled, and the holders of those shares will not share in the value of the reorganized company. Pioneer believes that the restructuring plan that has been negotiated with the senior creditors will provide financial viability and stability for the future.
The filings with the courts in Houston and Montreal allow Pioneer to implement the restructuring while continuing to operate its business in the ordinary course and in a manner consistent with its emphasis on the highest standards of environmental, health, and safety practices.
The filings are part of a restructuring effort that began in December 2000 when Pioneer deferred an interest payment on its secured notes. Pioneer has also obtained an agreement for debtor-in-possession financing in the amount of $50 million. The terms of the financing provide the company with $4 million more financing than was available under the previous revolving credit facility, which Pioneer believes is adequate for its needs. Liquidity at June 30, 2001, adjusted for the additional DIP availability, was $20.4 million.