Judge approves Warburg-backed Wellman's bankruptcy plan

Wellman, a Warburg Pincus portfolio company that manufactures products including polyester and resin, is seeking to emerge from Chapter 11 protection in by 31 December now that a bankruptcy court has approved its recovery plan.

Wellman, a maker of polyester and plastic products, will ask its creditors to vote on the plan in December.

The company will swap the debt of its first lien and second lien holders for equity. Wellman is trying to raise $90 million in a rights offering to repay loans, deferred financing fess, administrative expenses and professional fees, among other things. The first lien holders will receive 70 percent of the common stock in the reorganised company, while the second lien holders will get 30 percent.

Wellman said it will liquidate its remaining assets if it cannot raise the money through the rights offering.

Warburg invested $126 million in Wellman in 2003 and the company collapsed into bankruptcy in February under the weight of a heavy debt load and rising raw materials costs. 

Wellman is one of 35 private equity-backed companies that have filed for bankruptcy this year. Other private equity firms that have seen portfolio companies seek Chapter 11 protection this year include Cerberus Capital Management, Sun Capital and Apollo Global Management.