Congoleum , the official asbestos claimants' committee and the official committee of bondholders recently filed a revised
plan of reorganization in Congoleum’s chapter 11 case. For the latest update on Congoleum's updated reorganization plan
On October 22, 2009, Congoleum Corporation ("Congoleum"), a majority–owned subsidiary of American Biltrite Inc.
("American Biltrite"), together with the official asbestos claimants' committee and the official committee of bondholders,
jointly filed a revised plan of reorganization (the "Second Amended Joint Plan") and a related proposed disclosure statement
(the "Disclosure Statement") in Congoleum's chapter 11 case with the United States District Court for the District of New
Jersey (the "District Court"). The District Court has scheduled a hearing for November 19, 2009, to consider the adequacy of
the Disclosure Statement for the Second Amended Joint Plan.
If the District Court confirms the Second Amended Joint Plan and that plan becomes effective, the Second Amended Joint
Plan would permit Congoleum to exit its chapter 11 case free of liability for existing and future asbestos claims as provided
in the Second Amended Joint Plan. Under the proposed terms of the Second Amended Joint Plan, it is contemplated that a trust
would be created on or after the date the District Court confirms the Second Amended Joint Plan and by the effective date of
the Second Amended Joint Plan (the "Plan Trust"), which trust would assume the liability for Congoleum's current and future
asbestos claims. The Plan Trust would receive the proceeds of various settlements Congoleum has reached with a number of
insurance carriers and would be assigned Congoleum's rights under its remaining insurance policies covering asbestos product
liability. That trust also would receive 50.1% of the newly issued common stock of reorganized Congoleum on the effective
date of the Second Amended Joint Plan.
Under the proposed terms of the Second Amended Joint Plan, existing shares of Class A and Class B common stock of
Congoleum would be cancelled and holders of those shares, including American Biltrite, would not receive anything on account
of their cancelled shares.
The Second Amended Joint Plan would govern an intercompany settlement and ongoing intercompany arrangements among American
Biltrite and its subsidiaries and reorganized Congoleum. The Amended Joint Plan provides that the final terms of the
intercompany arrangements among American Biltrite and its subsidiaries and reorganized Congoleum would be memorialized in a
new agreement to be entered into by reorganized Congoleum and American Biltrite in form and substance mutually agreeable to
the official committee of bondholders, the official asbestos claimants' committee and American Biltrite. The existing
intercompany arrangements providing for management services by American Biltrite to reorganized Congoleum and other business
relationships expire on the earlier of (a) the effective date of a plan of reorganization for Congoleum, following a final
order of confirmation, or (b) March 31, 2010, unless renewed. Although there can be no assurances, American Biltrite
currently expects that the terms of any new intercompany agreement would be substantially similar to the form of that
agreement that was included in previous proposed plans of reorganization for Congoleum and would provide for the provision of
management services by American Biltrite to reorganized Congoleum and other business relationships substantially consistent
with their traditional relationships.
The prior form of new intercompany agreement contemplated the agreement becoming effective on the date the plan became
effective and having a term of two years. In addition, consistent with the terms of previous plans of reorganization
proposed for Congoleum, under the terms of the Second Amended Joint Plan, American Biltrite's rights and claims to
indemnification from Congoleum under the existing joint venture agreement between American Biltrite and Congoleum that relate
to American Biltrite's contribution to Congoleum in 1993 of American Biltrite's tile division, and the joint venture
agreement itself, would be deemed rejected and disallowed upon the effective date of the Second Amended Joint Plan, and
therefore eliminated. The Second Amended Joint Plan's rejection and disallowance of the joint venture agreement and American
Biltrite's claims thereunder would include any unfunded indemnification claims American Biltrite may have had prepetition and
during the pendency of Congoleum's chapter 11 case as well as any such claims American Biltrite might otherwise be entitled
to assert after the Second Amended Joint Plan becomes effective.
Holders of Congoleum's $100 million in 8.625% Senior Notes due in August 2008 would receive on a pro rata basis $33
million in new 9% senior secured notes (the "New Senior Notes") maturing December 31, 2017. The Second Amended Joint Plan
provides that the indenture to govern the New Senior Notes will provide for possible additional issuances of New Senior Notes
by reorganized Congoleum (the "Additional Notes") with the amount of Additional Notes to be issued being determined as of the
end of reorganized Congoleum's fiscal year ending December 31, 2011, and on an annual basis at the end of each of the
succeeding five years, and based on prescribed financial measurements relating to reorganized Congoleum's financial results
for those years. In no event would the cumulative amount of Additional Notes issued exceed $37 million. The New Senior
Notes would be subordinated to the liens or security interests granted by reorganized Congoleum under the working capital
facility contemplated by the Second Amended Joint Plan to be provided to Congoleum on the effective date of the Second
Amended Joint Plan. In addition, holders of the $100 million in 8.625% Senior Notes due in August 2008 would receive 49.9%
of the common stock of reorganized Congoleum. Congoleum's obligations for the $100 million in 8.625% Senior Notes due in
August 2008, including accrued pre-petition interest (which amounted to $3.6 million), would be satisfied by the New Senior
Notes and 49.9% of the common stock of reorganized Congoleum to be issued if the Second Amended Joint Plan becomes effective.
Copies of the Second Amended Joint Plan and the Disclosure Statement are attached hereto as Exhibits 99.1 and 99.2,
respectively, and the Second Amended Joint Plan and the Disclosure Statement are incorporated by reference herein.
On December 31, 2003, Congoleum filed a voluntary petition with the United States Bankruptcy Court for the District of New
Jersey (the "Bankruptcy Court") (Case No. 03–51524) seeking relief under Chapter 11 of the United States Bankruptcy
Code as a means to resolve claims asserted against it related to the use of asbestos in its products decades ago. On August
17, 2009, the District Court withdrew Congoleum's chapter 11 case from the Bankruptcy Court and assumed authority over the