Gibson Brands – Files Fifth Amended Joint Plan of Reorganization, $445 million is Midpoint Estimate as to Distributions Under Plan

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October 1, 2018 – Gibson Brands filed a Fifth Amended Joint Chapter 11 Plan of Reorganization [Docket No. 842] and a related memorandum of law in support [Docket No. 850]. The Court documents and the memorandum explains, “This is a single Plan for all of the Debtors with respect to the classification, treatment and voting of Claims against, and Equity Interests in the Debtors….Pursuant to the Global Settlement, the treatment of and recoveries for Class 6 General Unsecured Claims has substantially improved as compared to the Third Amended Plan. Under the Plan, Holders of Allowed Claims in Class 6 will receive (i) a Pro Rata share of $4.25 million of cash, and (ii) a $4 million Profits Interest in TEAC Shares. GSO and the Holders of the Prepetition Secured Notes have waived any right to participate in such recoveries. As a result, the current estimated recovery to Holders of Claims in Class 6 under the Plan is between approximately 5.1% to 10.8%, which approximately doubles the estimated 2.7% to 5.4% recoveries under the Third Amended Plan. The Plan also provides GSO with an Allowed ITLA Guaranty Claim of $29,935,898 that will recover a $6,250,000 Profits Interest in Class 7.

Based upon its analyses of the three valuation methodologies, Jefferies concluded that the Enterprise Value of the Reorganized Debtors, as of an assumed effective date of September 30, 2018 (the ‘Assumed Effective Date’), will range from approximately $374 million to approximately $445 million, with a midpoint of approximately $410 million. This range of Enterprise Values differs from the range shown in the Disclosure Statement by approximately $15 million due to the value of tax attributes not previously incorporated into the valuation. The Enterprise Value has been adjusted for (a) approximately $20 million of net debt, (b) assumed after-tax estimated proceeds of approximately $7.3 million from the planned post-emergence sale of an asset held-for-sale, and (c) approximately $38 million from the election by the Required Supporting Noteholders to receive Class 7 recovery in the form of new common stock (on account of their TEAC Shares Profits Interests as contemplated by the Global Settlement) of the reorganized Debtors, to arrive at an Effective Date equity value (the ‘Equity Value’) that ranges from approximately $399 million to approximately $470 million with a midpoint of approximately $435 million.  In light of the Class 7 election, the Equity Value of the Reorganized Debtors is the same as the Plan Value and the Distributable Value. Thus, the total value (‘Total Value’) of the Debtors as of the Assumed Effective Date, calculated as Equity Value plus approximately $10.6 million in Profits Interests of TEAC Shares to be distributed under the Plan, ranges from approximately $410 million to approximately $481 million with a midpoint of approximately $445 million.”  

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