Foamex delays loan repayment, ponders Chapter 11

By David Reed, UT EditorLinwood, Pennsylvania-Foamex Corp., North America's troubled major polyurethane foam manufacturer, has delayed paying one of its major loans and is considering filing for Chapter 11 bankuptcy protection as one way of achieving a major financial restructuring. To steer the wide-ranging changes proposed, it has named Gregory Christian, currently its executive vice president, general counsel and secretary, as chief restructuring officer.Foamex has warned several times recently that market conditions, especially the major increases in raw material prices, have made it difficult for the firm to reduce its major debts, and so recent efforts have focused on restructuring its financial arrangements."Today's actions are consistent with our plans to position Foamex for future success," said Tom Chorman, president and chief executive officer, in its latest statement, issued 15 Aug.The statement says that Foamex LP-the firm's primary operating subsidiary-has reached an agreement with the agents for its senior lender groups, Bank of America, NA and Silver Point Finance, llc, to amend its credit agreements. This will will provide additional liquidity by allowing Foamex to access the remaining proceeds from the June 2005 sale of its rubber and felt carpet cushion businesses for working capital, and to waive certain default provisions in the agreements, the firm explained.In addition, Foamex is negotiating with representatives of an ad hoc committee of loans (Senior Subordinated Notes) due for repayment 15 August 2005 and in 2007. Specifically, Foamex says it will not make the $51.6-million principal payment on its 13.5-percent Senior Subordinated Notes that mature today (15 Aug). This move is "in consideration of its best long-term interest," the firm's statement added.The discussions here relate to the "possible conversion of a substantial portion of the company's indebtedness into equity," the statement continued.In a final recent move, Foamex said that it will be filing with the Securities and Exchange Commission for a five-day extension of the 12 Aug. 2005 deadline for its report for the fiscal quarter ended 3 July 2005.The restructuring of Foamex's balance sheet may be implemented under Chapter 11 of the US Bankruptcy Code, possibly through a pre-arranged plan of reorganisation, Foamex explained. This allows the firm's debtors to control the business and try to save it from failure."However, no assurance can be given that a consensual plan will be agreed upon," the statement warned."We are pleased to have the ongoing support of our senior lenders," said Chorman, adding that "we will continue to negotiate with our other debt-holders to achieve a solution to our legacy balance sheet issues that will result in a much stronger company able to generate long-term value."Importantly, these steps and our ongoing negotiations should have no effect on Foamex's day-to-day operations. We remain committed to continuing to provide our customers with the high level of service and products to which they are accustomed and to maintaining strong supplier relationships," Chorman concluded."