Struggling Xerium Technologies, citing "overwhelming support from its lenders" for its previously announced restructuring plan, has filed to reorganize its debts under the federal bankruptcy code.
The publicly traded Raleigh-based company, which makes equipment for the papermaking industry, announced this morning that it has filed a prepackaged Chapter 11 bankruptcy. Prepackaged bankruptcies, which require advance agreements with lenders, are faster and less costly than a traditional bankruptcy.
Indeed, Xerium said it expects to emerge from bankruptcy in 30 to 60 days. In the meantime, the company will continue to operate.
Xerium's bankruptcy was precipitated by a large debt load that became insurmountable -- despite job cuts and other cost-saving measures -- when the recession undercut its business. Third quarter sales fell 18 percent to $130.3 million, and the company posted a $7.4 million loss in the quarter.
The company has about 3,300 employees worldwide. Its bankruptcy filing listed $693.5 million in assets and $813.2 million in debts.
Xerium CEO Stephen R. Light, in a prepared statement, hailed the restructuring as "a major accomplishment for the company" that will enable it to reduce its debt and introduce new products.
The restructuring plan calls for converting $620 million in debt into $10 million in cash, $410 million in new loans that mature in 2015, and 82.6 percent of the company's common stock.
Unlike many bankruptcies that wipe out the stakes of shareholders, existing shareholders would own 17.4 percent of the common stock and receive warrants to purchase up to an additional 10 percent.
The company said it has a commitment from lenders for $80 million in new financing, which must be approved by the bankruptcy court, "to assure its liquidity during the restructuring process."
The company also is seeking court approval for its suppliers to receive money owed them both before and after the bankruptcy filing. The Chapter 11 filing was made in federal bankruptcy court in Delaware.