Linwood, Pennsylvania-Foamex International Inc., which has been in Chapter 11 bankruptcy protection since September 2005, has filed a court motion to limit certain trading in equity securities. The group said the move is intended "to protect net operating losses," and hence to maximise the company's value.
Foamex requested the US Bankruptcy Court for the District of Delaware to approve measures to protect the its federal tax net operating losses (NOLs). The company added that it believes the NOLs, estimated at about $292 million at 1 Jan 2006, may prove to be a valuable asset of its bankruptcy estate.
Foamex wants the court to establish procedures to be met before certain transfers or trading of the group's equity securities are allowed. Acquisitions by shareholders with equity holdings of five percent or more, or who could thereby become owners of five percent or more, of Foamex's common stock, may give rise to an ownership change that could limit the company's utilisation of its NOLs.
Such relief will allow Foamex to monitor and prevent certain transfers and acquisitions of equity securities to preserve the value of its NOLs, said a 20 April statement from Foamex.
"Importantly, the requested relief does not bar all trading in Foamex's equity securities," the statement said. Foamex pointed out that wants to monitor only those stock transfers or acquisitions that pose a serious risk under the US tax code's 'ownership change' test.