The creditors’ committee for bankrupt South Korean chipmaker MagnaChip Semiconductor LLC has won court approval for its plan to reorganize the company.
US Bankruptcy Judge Peter Walsh approved the plan on Friday after creditors modified it to boost the amount given to Korea Exchange Bank, MagnaChip’s lender.
“The amended plan substantially improved” the lender’s recovery, Joshua Fried, a MagnaChip attorney, told Walsh in Wilmington, Delaware.
MagnaChip said it would withdraw its plan to liquidate once the creditors’ proposal is implemented. The company said it decided not to seek approval of its liquidation plan because the lender supported the creditors’ committee.
“The treatment of creditors’ claims has vastly improved,” John Sherwood, a lawyer for the committee, told Walsh. The plan will create “a company on a restructured basis that is very strong” and has “a bright future.”
The plan was “overwhelmingly accepted” by creditors entitled to vote on it, Sherwood said. The lender will get 35 percent of the US$95 million it is owed in cash and a new term loan of as much as US$61.8 million to satisfy its claims, according to court documents.
Noteholders owed about US$500 million will share 5 percent of the reorganized company’s stock and the right to buy as much as 84 percent in an offering, according to court documents. A unit of Avenue Capital Management II LP, the largest noteholder, will act as the “backstop purchaser” and buy at least 67 percent. The equity offering was increased by US$10 million to US$35 million, Sherwood said.
“The new equity investment and plan to reorganization is a reflection of our competitiveness and growth potential,” MagnaChip chief executive officer Sang Park said in a statement released in Seoul yesterday. “There has been heightened interest in MagnaChip as business conditions improve and as the overall economy recovers.”
Unsecured creditors will get a “gift” of as much as US$324,000 from the noteholders, for a recovery of 10 percent of their claims, court papers show. Subordinated noteholders, owed US$250 million, will get 1 percent of the reorganized equity and warrants to buy 5 percent more.
MagnaChip and five affiliates sought bankruptcy protection in June, listing assets of US$425 million and debt of US$1.04 billion as of Dec. 31. The company’s sales units in Taiwan, Europe and Japan, and its South Korean sales and production operations, are not involved in the bankruptcy.
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