Form 8-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 11, 2011
Constar International Inc.
(Exact name of registrant as specified in its charter)
|
|
|
|
|
Delaware
|
|
001-01982
|
|
13-1889304 |
|
|
|
|
|
(State or other jurisdiction
of incorporation)
|
|
(Commission File Number)
|
|
(IRS Employer Identification No.) |
|
|
|
One Crown Way
Philadelphia, PA
|
|
19154-4599 |
|
|
|
(Address of principal executive offices)
|
|
(Zip Code) |
Registrants telephone number, including area code: (215) 552-3700
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o |
|
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|
o |
|
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
|
o |
|
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
|
o |
|
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 1.01 Entry into a Material Definitive Agreement
Item 1.02 Termination of a Material Definitive Agreement
Item 1.03 Bankruptcy or Receivership
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
On January 11, 2011 (the Petition Date), Constar International Inc. (the Company or
Constar) and certain of its subsidiaries (collectively the Debtors) filed voluntary petitions
in the United States Bankruptcy Court for the State of Delaware (the Bankruptcy Court) seeking
reorganization relief under the provisions of Chapter 11 of Title 11 of the United States Code (the
Bankruptcy Code). The chapter 11 cases are being jointly administered under the caption In re
Constar International Inc., et al., Chapter 11 Case No. 11-10109 (the Chapter 11 Cases). The
Debtors will continue to operate their businesses and manage their properties as debtors in
possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable
provisions of the Bankruptcy Code and orders of the Bankruptcy Court.
On January 11, 2011, the Company issued a press release announcing the filing of the Chapter
11 Cases (the Press Release). A copy of the Press Release is attached hereto as Exhibit 99.1 and
is incorporated by reference into this Item 1.03.
Restructuring and Lock-up Agreement
On January 11, 2011, the Debtors entered into a Restructuring and Lock-Up Agreement (the
Restructuring Agreement) with holders (the Consenting Noteholders), in the aggregate, of in
excess of 75% of the aggregate principal amount of the Companys Senior Secured Floating Rate Notes
Due 2012 (the Floating Rate Notes).
Pursuant to, and subject to the terms and conditions of, the Restructuring Agreement, the
Consenting Noteholders have agreed to vote in favor the Debtors Joint Plan of Reorganization
attached to the Restructuring Agreement (the Plan) and have agreed not to transfer their Floating
Rate Note Claims (as defined in the Restructuring Agreement) unless the transferee has agreed to
the Restructuring Agreement. Pursuant to, and subject to the terms and conditions of, the
Restructuring Agreement, the Debtors have agreed to support and take all actions necessary or
reasonably requested by the Consenting Noteholders to facilitate consummation of the Plan and have
agreed not to take certain actions, including, among others, any actions inconsistent with the
Plan. The Restructuring Agreement may be terminated by the Consenting Noteholders for, among other
reasons, the Companys failure to achieve the milestones set forth in the Restructuring Agreement.
The milestones include, among others, a number of court approvals.
The foregoing description of the Restructuring Agreement is qualified in its entirety by
reference to the Restructuring Agreement, a copy of which is attached hereto as Exhibit 99.2 and is
incorporated by reference herein.
Debtor-in-Possession Financing Agreement
On January 14, 2011 (the Closing Date), the Company entered into a Senior Secured Priming
Super-Priority Debtor in Possession Note Purchase Agreement (the DIP Note Purchase Agreement)
among the Company and its U.S. subsidiaries as issuers of notes thereunder (the Issuers), the
Companys U.K. subsidiary as guarantor of such notes (together with the Issuers, the Note
Parties), the entities from time to time party thereto as purchasers of such notes (the
Purchasers), and Black Diamond Commercial Finance, L.L.C. as agent for the Purchasers (Agent).
The Purchasers and the Agent are holders of the Floating Rate Notes. The Bankruptcy Court entered
an order providing interim approval for the DIP Note Purchase Agreement on January 13, 2011.
The DIP Note Purchase Agreement provides for the issuance and sale of notes (the Notes) by
the Issuers to the Purchasers in an aggregate principal amount of up to $55 million. The Notes bear
interest
at a rate of LIBOR plus 8.0%, subject to a 1.0% floor, payable in arrears. The proceeds from
the sale of the of the Notes under the DIP Note Purchase Agreement will be used to repay the
Companys revolving credit agreement with General Electric Capital Corporation dated as of February
11, 2010, as amended by Amendment No. 1 to Credit Agreement, dated as of August 12, 2010 (the GE
Credit Agreement), meet cash collateral requirements under existing letters of credit, pay
permitted prepetition claims, provide the Company with working capital, and for other general
corporate purposes. The Notes are guaranteed by the Companys UK subsidiary. Substantially all of
the Note Parties tangible and intangible property is pledged as collateral for the Notes.
On the Closing Date, the Issuers issued $38.0 million in aggregate principal amount of Notes.
Additional Note issuances are subject to the terms and conditions of the DIP Note Purchase
Agreement and must be consistent with the Approved Budget (as defined below). The aggregate
principal amount of subsequent Note issuances cannot be less than $3 million per issuance and may
occur no more frequently than one time per calendar week. The Notes may be repaid prior to
maturity, in whole or in part, in increments of at least $0.1 million.
The Note Parties must pay non-refundable fees equal to $50,000 per annum, payable annually in
advance on the Closing Date for the twelve-month period following the Closing Date and on each
anniversary of the Closing Date until all obligations under the DIP Note Purchase Agreement have
been paid in full.
An arrangement fee of 1%, or $550,000, and a purchase commitment fee of 2%, or $1.1 million,
was paid on the Closing Date. There is an unused commitment fee of 2% per annum on the monthly
average unused amount of the aggregate $55 million commitment.
The Notes will mature upon the earliest of (a) October 1, 2011 (b) the date that is the
forty-fifth (45th) day after the entry of the interim order of the Bankruptcy Court approving the
DIP Note Purchase Agreement and related matters to the extent that the requisite final order with
respect to such matters has not been entered on or prior to such date, (c) the effective date of a
confirmed chapter 11 plan with respect to any Note Party, (d) the date of the conversion of any
Note Partys bankruptcy case(s) into a liquidation proceeding pursuant to Chapter 7 of the
Bankruptcy Code, (e) the date of the sale of all or substantially all of the assets of the Note
Parties and (f) the acceleration of the Note Parties obligations under the DIP Note Purchase
Agreement or the termination of the DIP Note Purchase Agreement.
At maturity the Notes must be paid in full except that up to $15 million may be settled by the
issuance of secured notes (the Roll-Over Notes). The Roll-Over Notes will bear interest at a
floating rate of LIBOR plus 8.0% and will mature four years from their issuance.
The DIP Note Purchase Agreement includes the following financial covenants:
Consolidated EBITDA (as defined in the DIP Note Purchase Agreement) of the Issuers cannot be
less than the amounts set forth below for the periods indicated, calculated as of the last day of
each fiscal month:
|
|
|
|
|
(In millions) |
|
Minimum |
|
Period |
|
EBITDA |
|
January 1, 2011 through April 30, 2011 |
|
$ |
2.7 |
|
January 1, 2011 through May 31, 2011 |
|
$ |
5.6 |
|
January 1, 2011 through June 30, 2011 |
|
$ |
8.2 |
|
January 1, 2011 through July 31, 2011 |
|
$ |
10.1 |
|
January 1, 2011 through August 31, 2011 |
|
$ |
12.4 |
|
January 1, 2011 through September 30, 2011 |
|
$ |
14.0 |
|
The proceeds of Notes issued under the DIP Note Purchase Agreement may only be used by the
Issuers for the purposes and up to the amounts set forth in the Issuers budgets approved by the
Agent and a supermajority of the Purchasers (the Approved Budget). Further, after the fourth week
from the Closing Date, (a) the Companys actual Cumulative Net Operating Cash Flows (as defined in
the DIP Note Purchase Agreement) cannot be more than $4 million less than the amount set forth in
the Approved Budget for the corresponding period, (b) maximum cumulative Professional Fees (as
defined in the DIP Note Purchase Agreement) cannot exceed the amount set forth in the Approved
Budget for the corresponding period by more than 15% and (c) maximum cumulative Capital
Expenditures (as defined in the Note Purchase Agreement) paid in cash cannot exceed the amount set
forth in the Approved Budget for the corresponding period by more than 10%.
The DIP Note Purchase Agreement also contains certain non-financial covenants that, among
other things, restrict the Companys ability to incur indebtedness, create liens, sell assets, and
enter into transactions with affiliates.
If an event of default should occur and be continuing under the DIP Note Purchase Agreement,
the Agent may (and shall at the request of the requisite Purchasers), among other things,
accelerate the maturity of the Notes and terminate the DIP Note Purchase Agreement. Events of
default include, among others, the failure to achieve certain milestones set forth therein, the
occurrence of certain events set forth therein with respect to the Debtors bankruptcy cases, and
the failure to make a payment on any indebtedness of more than $2 million.
The foregoing summary of the DIP Note Purchase Agreement is qualified by reference to the full
text of the DIP Note Purchase Agreement, a copy of which is attached hereto as Exhibit 99.3 and
incorporated herein by reference.
Capitalized terms used in this description of the DIP Note Purchase Agreement and not
otherwise defined in this Current Report on Form 8-K have the respective meanings ascribed thereto
in the DIP Note Purchase Agreement.
Exit Financing Commitment Letter
On
January 11, 2011, the Company and Wells Fargo Capital Finance,
LLP (Wells Fargo) agreed to the terms of a Senior Secured Asset-Based Exit Revolving Loan
Facility Commitment Letter (the Commitment Letter) and agreed to enter into the Commitment Letter, following approval by the Bankruptcy Court.
Pursuant
to the Commitment Letter, Wells Fargo would provide a secured revolving
loan and letter of credit facility to the reorganized Company (the Exit Facility), in the amount
of $60 million, with a letter of credit sublimit of
$15 million. Borrowings under the Exit Facility will bear interest, at the option of the Company,
at one of the following rates: (i) a fluctuating base rate of not less than 0.5% plus a margin ranging from 2.75% to 3.25%
per year, or (ii) a fluctuating LIBOR base rate plus a margin ranging from 1.75% to 2.25% per year.
The Exit Facility will expire four years after its closing date. Actual available credit under the
Exit Facility would be subject to a borrowing base calculated as a percentage of eligible inventory
and accounts receivable less discretionary agent reserves. The Companys U.S. operating
subsidiaries and U.K subsidiary would be borrowers under the Exit Facility, and the Company and all
of its North American subsidiaries that are not borrowers would guarantee the Exit Facility.
Substantially all of the assets of the borrowers and guarantors would secure the Exit Facility,
with a first priority lien on accounts receivable, inventory and certain other property and a
second priority lien on real property, equipment and certain other property.
The terms and conditions to Wells Fargos commitment include among others (a) Bankruptcy Court
confirmation of a plan of reorganization acceptable to Wells Fargo, (b) the negotiation, execution
and delivery of definitive documentation and (c) the absence of a material adverse change with
respect to the business, operations, projections, profits or assets of the Company. The Commitment
Letter terminates on July 15, 2011.
The foregoing summary of the Commitment Letter is qualified by reference to the full text of
the Commitment Letter, a copy of which is attached hereto as Exhibit 99.4 and incorporated herein
by reference.
On the Closing Date, the Note Parties entered into the DIP Note Purchase Agreement, as
described above. Subject to any obligations with respect to continuing letters of credit, upon
the termination and discharge of the outstanding indebtedness under the GE Credit Agreement and the
termination of the GE Credit Agreement on the Closing Date, the ability to borrow under the GE
Credit Agreement was terminated.
In addition to the termination of the GE Credit Agreement, Constar, Inc. terminated its
interest rate swap transaction with Rabo Capital Services, Inc.
A summary of the GE Credit Agreement was set forth in the Companys Quarterly Report on Form
10-Q filed with the Securities and Exchange Commission on August 16, 2010.
Item 2.04 Triggering Events That Accelerate or Increase a Direct Financial Obligation or an
Obligation Under an Off-Balance Sheet Arrangement.
The filing of the Chapter 11 Cases described in Item 1.03 above constituted an event of
default or otherwise triggered repayment obligations under the Indenture, dated as of February 11,
2005, among the Debtors and The Bank of New York as Trustee, governing the Floating Rate Notes (the
Indenture), and the GE Credit Agreement (collectively, the Debt Documents). As a result of the
events of default, all obligations under the Debt Documents became automatically and immediately
due and payable. The Debtors believe that any efforts to enforce the payment obligations under the
Debt Documents are stayed as a result of the filing of the Chapter 11 Cases in the Bankruptcy
Court. The amount outstanding under the GE Credit Agreement as of January 11, 2011 was $29.1
million and the principal amount outstanding under the Indenture was $220 million.
Item 3.01 Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer
of Listing.
On January 11, 2011, the Company was given notice by the NASDAQ Stock Market that in
connection with the Companys filing of the Chapter 11 Cases, and in accordance with Listing Rules
5101, 5110(b) and IM-5101-1, NASDAQ staff has determined that the Companys common stock will be
delisted from The NASDAQ Stock Market. Trading will be suspended at the opening of business on
January 20, 2011. The Company does not intend to appeal the NASDAQ staffs determination.
Therefore, the Company expects that the Companys common stock will be delisted after completion by
NASDAQ of application to the SEC, and the Companys securities will not be eligible to trade on the
OTC Bulletin Board or in the Pink Sheets unless a market maker makes application to register in
and quote the security and such application is cleared. On January 14, 2011, the Company issued a
press release regarding this matter, which press release is attached hereto as Exhibit 99.5.
Item 7.01 Regulation FD Disclosure.
Court filings and claims information regarding the Chapter 11 Cases will be available at
http://www.kccllc.net/constar. The Company expects to begin submitting monthly operating reports to
the Bankruptcy Court in March 2011, and also plans to post these monthly reports and other
information to the CompanyRestructuring portion of the Companys website at
www.constar.net, and file them with the SEC as exhibits to Current Reports on Form 8-K. In
lieu of continuing to file Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, the
Company intends to deregister or seek no-action letter relief from the SEC to implement a modified reporting
program in accordance with Securities Exchange Act of 1934, as amended, Release No. 34-9660 (June
30, 1972), Staff Legal Bulletin Number 2 (April 15, 1997) and the SECs related no-action
correspondence.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits.
|
|
|
Exhibit 99.1
|
|
Press Release dated January 11, 2011 |
|
|
|
Exhibit 99.2
|
|
Restructuring and Lock-Up Agreement, dated as of January 11, 2011, among Constar International Inc., the other
Debtors party thereto and the Consenting Noteholders party thereto. |
|
|
|
Exhibit 99.3
|
|
Senior Secured Priming Super-Priority Debtor in Possession Note Purchase Agreement, dated as of January 14, 2011,
among Constar International Inc. and the other Note Parties, the entities from time to time party thereto as
purchasers of the notes issued thereunder, and Black Diamond Commercial Finance, L.L.C., as Agent. |
|
|
|
Exhibit 99.4
|
|
Senior Secured Asset-Based Exit Revolving Loan Facility Commitment Letter, dated as of January 11, 2011, between
Constar International Inc. and Wells Fargo Capital Finance, LLC |
|
|
|
Exhibit 99.5
|
|
Press Release dated January 14, 2011 |
Forward-looking statements
This Current Report on Form 8-K (including the exhibits) may contain forward-looking
statements within the meaning of the federal securities laws, including statements regarding the
intent, belief or current expectations of the Company and its management which are made with words
such as will, expect, believe, and similar words. These forward-looking statements involve a
number of risks, uncertainties and other factors, which may cause the actual results to be
materially different from those expressed or implied in the forward-looking statements. Important
factors that could cause the actual results of operations or financial condition of the company to
differ from expectations include: (i) the Companys ability to continue as a going concern; (ii)
the Companys ability to satisfy the conditions to the Restructuring Agreement, the DIP Note
Purchase Agreement and the Commitment Letter; (iii) the ability of the Company to operate pursuant
to the terms of any debtor-in-possession credit facility; (iv) the Companys ability to obtain
court approval with respect to motions in the Chapter 11 proceeding; (v) the ability of the Company
to develop, confirm and consummate one or more plans of reorganization with respect to the Chapter
11 proceeding; (vi) risks associated with third parties seeking and obtaining court approval to
terminate or shorten the exclusivity period for the Company to propose and confirm one or more
plans of reorganization, for the appointment of a Chapter 11 trustee or to convert the cases to
Chapter 7 cases; (vii) the ability of the Company to obtain and maintain normal terms with vendors
and service providers; (viii) the Companys ability to maintain contracts that are critical to its
operations; (ix) the potential adverse impact of the Chapter 11 Cases on the Companys liquidity or
results of operations; (x) the ability of the Company to fund and execute its business plan;(xi)
the ability of the Company to attract, motivate and/or retain key executives and employees; and
(xii) other risks and factors regarding the Company identified from time to time in the Companys
reports filed with the SEC, including the risk factors identified in its Annual Report on Form 10-K
for the year ended December 31, 2009, and in subsequent filings made prior to, on or after today.
The Company does not intend to review, revise, or update any particular forward-looking statements
in light of future events.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
|
|
|
|
Dated: January 18, 2011 |
CONSTAR INTERNATIONAL INC.
|
|
|
By: |
/S/ J. MARK BORSETH
|
|
|
|
Name: |
J. Mark Borseth |
|
|
|
Title: |
Executive Vice President
and Chief Financial Officer |
|
EXHIBIT INDEX
|
|
|
Exhibit 99.1
|
|
Press Release dated January 11, 2011 |
|
|
|
Exhibit 99.2
|
|
Restructuring and Lock-Up Agreement, dated as of January 11, 2011, among Constar International Inc., the other
Debtors party thereto and the Consenting Noteholders party thereto |
|
|
|
Exhibit 99.3
|
|
Senior Secured Priming Super-Priority Debtor in Possession Note Purchase Agreement, dated as of January 14, 2011,
among Constar International Inc. and the other Note Parties, the entities from time to time party thereto as
purchasers of the notes issued thereunder, and Black Diamond Commercial Finance, L.L.C., as Agent |
|
|
|
Exhibit 99.4
|
|
Senior Secured Asset-Based Exit Revolving Loan Facility Commitment Letter, dated as of January 11, 2011, between
Constar International Inc. and Wells Fargo Capital Finance, LLC |
|
|
|
Exhibit 99.5
|
|
Press Release dated January 14, 2011 |