Global lumber supplier Northwest Hardwoods secured a Delaware bankruptcy judge’s approval last Wednesday to immediately put its Chapter 11 reorganization into effect, after a more than six-week sprint through the nearly $450 million debt restructuring.
The company entered Chapter 11 with what Judge Shannon said was effectively a prepackaged bankruptcy. Debtors had already lined up a restructuring that would shed about $270 million of the company’s debt, largely through a debt-for-equity swap with noteholders.
In a declaration filed in advance of the hearing, Northwest president and chairman Nathan Jeppson said that deferring the effective date “could detrimentally impact debtors’ relationships with customers, employees and vendors, and could negatively impact value for stakeholders across the enterprise, risks that are unnecessary given the unanimous support for the Plan by voting economic stakeholders.”
Equity ownership under the plan will shift to secured noteholders, who will receive proportional shares of 99% of the reorganized company’s equity and will also hold a new $110 million secured term loan in the reorganized company. The remaining 1% of equity will be distributed to prepetition equity holders.
A new, $100 million asset-based revolving credit loan agreement provided exit financing for the plan, secured by first lien on key collateral and a second lien covering the rest of the company’s assets.
Northwest blamed trade disputes with China and the COVID-19 pandemic for stunting its business and hampering its ability to service its secured debt. Northwest was largely owned by private equity Littlejohn & Co. LLC before filing for Chapter 11 .
The reorganized business was valued between $170 million and $210 million, with a midpoint of $190 million, compared with a prepetition book value of $357.3 million, according to court documents filed ahead of the confirmation.
Straight liquidation of the business would have yielded between $113 million and $162.5 million, with $99.1 million to $135.1 million subject to capture by secured lienholders. Secured noteholders would receive only 23 percent of their claims, compared with a 61 percent recovery under the plan.
Northwest operates from 20 mill locations in America’s West, the Appalachian region and the American North from Wisconsin to Maine, with three combination distribution and warehouse centers and 13 other leased warehouses.
The company reported at the start of the case that it serves 2,000 customers worldwide, providing a variety of domestic hardwood lumber, exotic hardwood lumber, hardwood plywood panel products, and other wood products.