Memorex Telex NV, in process of restructuring its debt yet again to try and get the burden down to a tolerable level, reports that it has started solicitation of votes in support of the latest restructuring plan. Under the plan, some $850m of the company’s $950m in senior bank and public debt and accrued interest will be converted to equity, and Memorex is optimistic that the proposals will go through, saying that it has received substantial support for the restructuring plan from each of the three requisite creditor groups, with indications of support from the holders of more than 83% of each of the working capital loans and Tranche A of the term loans, 71% in principal amount of Tranche B of the term loans, and 55% of the senior notes of the company – the debt burden is so far from being sustainable that holders of the debt are unlikely to see anything unless they support the debt-for-equity swap. Senior noteholders and term loan lenders will receive 100% of the new common stock outstanding immediately following the restructuring. As in the Wang Laboratories Inc restructuring, existing common shareholders are left with nothing more than warrants, which will entitle them to buy about 4% of the new common stock at a striking price of $14 a share. The old common stock is worthless and will be cancelled. After voting closes on February 9, the company will seek to have the plan of reorganization confirmed in its second prepackaged voluntary proceeding under Chapter 11 of the US Federal Bankruptcy Code. Trade creditors are not affected by the plan and will be paid in full, and the company continues to operate normally. Memorex Telex, which also announced completion of sales of some of its non-core assets, including its computer supplies business, for $24m, says that it is confident that with the high levels of support for the plan, it will complete the restructuring prior to March 31, the end of the fiscal year.In the 1991 restructuring, senior and subordinated bondholders ended up with 80% of the common, preference holders got 3%, and common shareholders and bank debt holders got warrants for 5% and for 4%.
