Vodka seller Central European Distribution Corp., headed by Russian billionaire Roustam Tariko, will seek court approval of its so-called prepackaged restructuring plan just over a month after filing for bankruptcy.
U.S. Bankruptcy Judge Christopher Sontchi granted the Warsaw, Poland-based company’s request to hold a May 13 hearing on the plan saying “this is a true pre-pack plan with overwhelming creditor support,” at a hearing today in Wilmington, Delaware.
“This should be a quick, fully consensual pre-packed plan of reorganization,” said CEDC attorney Jay Goffman at today’s hearing. To ensure that operations aren’t disrupted it is essential that the plan be approved in about 35 days, he said.
The plan, negotiated with and voted on by creditors before the bankruptcy filing, would eliminate about $665.2 million in debt from CEDC’s and unit CEDC FinCo’s balance sheets, according to an April 7 statement.
2013 and 2016 note holders voted 99 percent and 97 percent respectively to accept the plan, the company said in the statement. Under the restructuring proposal, holders of existing 2016 notes would receive $822 million, consisting of $172 million in cash, $450 million in new secured notes and $200 million in new convertible notes for an estimated recovery of about 83.7 percent.
Holders of existing 2013 notes would get the option to partake in a separate offering from Tariko’s Roust Trading Ltd. for a share of $25 million in cash and $30 million in Roust Trading notes, for a projected recovery of about 35 percent. The note holders that don’t participate in the Roust offering with split $16.9 million in cash, according to the statement.
Once the proposed turnaround is completed all of reorganized CEDC’s equity would be owned by Roust Trading. Current shareholders are slated to receive nothing under the plan. Tariko would like to provide them with a “gift” of about $5 million out of his own pocket if allowed, Goffman told Sontchi.
The recovery plan also includes a new $100 million unsecured loan from an affiliate of Alfa Group. The restructuring doesn’t involve operating subsidiaries in Poland, Russia, Ukraine or Hungary, according to the release.
The maker of Bols vodka listed $1.98 billion in assets and $1.73 billion in debt in bankruptcy court documents filed April 7.
The company’s financial challenges surfaced after almost two decades of success in Poland. CEDC traces its roots to 1991 as the exclusive importer of Anheuser-Busch beer in Poland, according to its website. In 1998 it went public in New York with 2 million shares, and in 2005 it began distilling vodka. CEDC then expanded into Hungary, Russia and Ukraine.
The company said in court filings that it’s the largest integrated spirits beverage business by volume in central and Eastern Europe.
CEDC expanded into Russia just as Poles began drinking less vodka and Russia raised taxes and costs to discourage alcohol consumption. The global financial crisis, a 37 percent collapse in Russia’s currency, and accounting errors exacerbated the situation.
Russians drank less vodka in 2011 than they did in 2008, while Poles cut back by 7.7 percent, based on volume sales compiled by International Wine & Spirit Research, known as IWSR.
The case is In re Central European Distribution Corp., 13-10738, U.S. Bankruptcy Court, District of Delaware (Wilmington).