Advanced Lighting Technologies Reorganization and ... - Jenner & Block

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When a viable business entity is challenged to the extent that ... vendors and business partners assures the solidificat
Spring 2004

Bankruptcy, Workout and Corporate Reorganization Practice

Case Study Advanced Lighting Technologies Reorganization and Recovery Generation of a reorganization plan requires far more than satisfaction of creditors and equity holders. When a viable business entity is challenged to the extent that bankruptcy is required, emergence from bankruptcy is the destination but not the journey. Effective management of the company during the period of insolvency results in the most stable emergent organization and requires the debtor’s attorney to not only manage the bankruptcy process, but, together with management, achieve improvements in the business. Working with the debtor, its management, and operations and finance personnel, all areas are assessed for reduction of inefficiency, containment of costs and enhancement of revenues. Stabilization of relationships with lenders, vendors and business partners assures the solidification of the foundation of the future of the company, the result being a stronger, more stable organization with focused and dedicated management and personnel.

• Refinancing of ADLT’s senior credit facility within five months after the bankruptcy filing.

The reorganization of Advanced Lighting Technologies, Inc. (“ADLT”) is demonstrative of the impact of representation by experienced, businessoriented debtor’s counsel, with the ultimate result being an enduring, healthy and well-run company. ADLT is an “innovation-driven” designer, manufacturer and marketer of metal halide lighting products. The company competed with major producers in the lighting products and telecommunications market since its formation in 1995.

• Confirmation of an initially contested reorganization plan and emergence from Chapter 11 approximately ten months after case filing.

Several major issues arose by the time ADLT’s stock was delisted on the NASDAQ, and then shortly afterward when filing for bankruptcy under Chapter 11 of the Bankruptcy Code. Several unique achievements helped maneuver the company through the process, resulting in a viable business enterprise that was financially stable, structurally sound, and well-run. They include:

• In full compliance with the provisions of the Sarbanes-Oxley Act of 2002, restructuring a $14 million loan owed by ADLT’s Chief Executive Officer (“CEO”), including forgiveness of $10 million thereof. • Successfully arguing all contested matters in the case, defeating both procedural (tactical) and substantive (strategic) initiatives by other case constituents. • Developing and implementing a recapitalization strategy that attracted a $12 million preferred equity sale transaction during the case and an $18 million emergence equity investment. • Restructuring $100 million of publicly-traded bonds.

Jenner & Block, as general bankruptcy counsel for ADLT, provided the leadership and horsepower to accomplish the overall result in this case: emergence from a contested Chapter 11 case in ten months, with $18 million of fresh capital, a new $30 million senior credit facility, a fresh $114 million indenture and Sarbanes-Oxley-compliant forgiveness of $10 million of an officer/director loan. Jenner & Block’s experience, together with its business acumen and litigation prowess, enhanced ADLT’s emergence efforts and ultimately proved to be the key to the case’s success. Equally comfortable and effective in the boardroom and the courtroom, Jenner & Block lawyers guided ADLT’s management and board of directors through several impossible situations, and

on challenge from creditors and equity holders to many of the board’s and management’s decisions made in connection therewith, defended successfully those board and management decisions in the courtroom. In sum, ADLT was a typical company in 2002 and early 2003. It had good management, a solid business and profitability. It also had a multi-million dollar loan out to its president and CEO and too much bond debt that was soon to mature, and no cooperation from the capital markets vis-à-vis high enough valuation metrics to attract a refinancing of the bonds. Chapter 11 under Jenner & Block’s leadership proved the answer for ADLT. For additional information, please contact: Jeff J. Marwil, Esquire Partner Jenner & Block One IBM Plaza 330 North Wabash Avenue Chicago, IL 60611 312-923-2619 [email protected] www.jenner.com

Other Cases of Interest: Jenner & Block serves as debtor’s counsel in the Chapter 11 bankruptcy of Archibald Candy Corporation, parent company of Fannie May and Fanny Farmer Candy. Additionally, we are handling the sale of the assets of the debtor, which includes the trade names Fannie May, Fanny Farmer, and Sweet Factory. Jenner & Block attorneys were responsible for handling the successful restructuring of the largest service provider to a federal government unit. The restructuring involved $85 million in senior debt and $45 million in subordinated debt. The out-of-court restructuring was accomplished over a short period of time, and resulted in a completely viable entity. We serve as debtor’s counsel to Covanta Energy Corporation in its successful Chapter 11 reorganization proceedings. Covanta operates waste-toenergy, independent power production and water and wastewater treatment plants in the U.S. and abroad, including 55 power generation facilities. Covanta’s bankruptcy involved the disposition of numerous nonenergy assets and non-core businesses, and the restructuring or elimination of more than $1 billion in debt. Covanta’s bankruptcy was largely concluded in 2004 when it emerged from bankruptcy under new ownership with its core energy businesses intact. We are representing McDermott, Inc., the parent company of Babcock & Wilcox Co., a manufacturer of power generation equipment and industrial boilers, in connection with Babcock & Wilcox’s asbestos-related Chapter 11 proceeding in the U.S. Bankruptcy Court in New Orleans, Louisiana. Over the course of several months, Jenner & Block represented Roundy’s, Inc. and one of its affiliates in their $108 million acquisition of approximately 31 grocery stores from the bankruptcy estates of Fleming, Inc. and its affiliates. As a result of the Fleming transaction, Roundy’s expanded its operations from southeastern Wisconsin into Minnesota. Jenner & Block attorneys advised Roundy’s with respect to the structure of its “stalking horse” bid, saw Roundy’s through a competitive auction process and ultimately secured for Roundy’s the approval of its agreement with Fleming from the Delaware bankruptcy court.

©Copyright 2004 Jenner & Block LLP. Jenner & Block is an Illinois Limited Liability Partnership including professional corporations This publication is not intended to provide legal advice but to provide information on legal matters and Firm news of interest to our clients and colleagues. Readers should seek specific legal advice before taking any action with respect to matters mentioned in this publication. Under professional rules, this publication may be considered advertising material; the attorney responsible for this publication is Jeff J. Marwil. Cover image from the Collection of the Supreme Court of the United States.

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