MCI files Chapter 11

[roadrunnertex]

Motor Coach Industries to Restructure Balance Sheet with Pre-Negotiated Chapter 11 Filing

2008-09-15 14:45:01.320 GMT





    Debt Reduced By Approximately $420 Million Upon MCI's Emergence

                            from Chapter 11



   Franklin Mutual Advisers, LLC and Affiliates to Invest up to $160

             Million of New Equity to Repay Existing Debt



       MCI to Continue Normal Operations with No Impact to Coach

Production or Service; Company Secures $315 Million in DIP Financing





SCHAUMBURG, ILL.--(BUSINESS WIRE)--September 15, 2008

Motor Coach Industries ("MCI" or the "Company"), the leading

designer, manufacturer and marketer of coaches and the industry's

leading supplier of coach-related aftermarket parts and services,

today announced that the Company has reached agreement with its

secured lenders regarding a restructuring that will substantially

reduce the Company's debt.



   The restructuring, which will be implemented by means of a

pre-negotiated chapter 11 filing, will reduce the Company's total

indebtedness by approximately $420 million and would be expected to

improve cash flow by significantly reducing ongoing interest expense

by approximately $54 million annually. The restructuring plan will be

funded by Franklin Mutual Advisers, LLC and certain of its affiliates

(collectively "FMA"), a global investment management firm.



   Key elements of the proposed restructuring include:



   --  Repayment in full of the Company's approximately $160 million

        second lien secured debt



   --  Conversion of approximately $200 million of third lien secured

        debt into new equity of the reorganized Company



   --  Support of payments to MCI's critical vendors for pre-petition

        purchases of goods and services



   The pre-negotiated chapter 11 filing is expected to have no impact

on the Company's production facilities, delivery schedules, after-sale

parts availability or service centers. During the chapter 11 process,

vendors should expect to be paid for post-petition purchases of goods

and services in the ordinary course of business. The filing pertains

only to MCI's operations in the United States. The Company's Canadian

operations are not included in the filing.



   "Over the past several years, MCI has worked hard on a number of

initiatives to enhance our coach assembly capabilities, responsiveness

and supply chain effectiveness. More recently, in an effort to

strengthen MCI, we have been working with our financial advisors and

existing lenders to evaluate options regarding the optimal debt

structure for the company," said Tom Sorrells, President and CEO. "We

made the strategic decision to significantly reduce our debt,

strengthen our balance sheet and access new capital through a

voluntary filing under chapter 11 so that we can build on our

leadership position in the industry. We intend to work with our

current vendors and to continue operations without interruption to our

customers. The Company appreciates FMA's substantial financial

contribution to our restructuring and their support of our on-going

business. Our intention is to move quickly through the chapter 11

process and emerge by February 2009."



   In conjunction with its filing, MCI has secured a total of $315

million of debtor-in-possession ("DIP") financing, comprised of a $170

million senior DIP financing facility and $145 million junior DIP

financing facility. GE Capital is the arranger and largest lender of

the senior DIP facility that will refinance MCI's existing first lien

debt and provide additional liquidity necessary for day-to-day

operations. Goldman Sachs Credit Partners, L.P. is the arranger of,

and Monarch Alternative Capital LP (through certain of its affiliates

and funds under its management) is participating in, the junior DIP

facility. If approved by the Bankruptcy Court, the collective DIP

financing will provide ample liquidity, enabling MCI to meet all of

its post-petition obligations through the restructuring process.



   "Today we are taking the steps to position MCI for the future,"

added Mr. Sorrells. "Our core business is sound. We are receiving and

processing orders as usual and existing orders will be delivered as

scheduled. Our production operations, delivery schedules and customer

service functions will continue without interruption. With a solid

financial foundation, we will be able to take advantage of the

opportunities ahead and allow MCI to reach its full potential."



   MCI is advised by Rothschild Inc., AlixPartners LLP and Simpson

Thacher & Bartlett LLP.



   Additional information regarding the case can found at the

Company's web site: www.mcicoach.com. Information regarding

court-filed documents is available to the public at

http://pacer.psc.uscourts.gov or at

www.kccllc.net/motorcoachindustries.



   Commemorating its 75th anniversary, Motor Coach Industries,

headquartered in Schaumburg, Illinois, is the largest manufacturer of

intercity coaches for the tour, charter, line-haul, scheduled service,

and commuter transit sectors in the U.S. and Canada. The Company also

operates seven sales centers and nine service centers in the U.S. and

Canada and is the industry's leading supplier of aftermarket parts for

most makes and models.

[Nick Badame Refrig/ACC]

Hi RR Tex,

Funny, but it sounds like a round about way to fudge #'s to me..

Allthough my local MCI rep told me yesterday that they said no job cuts were on the table, I don't see how they will

turn debt into profit with out either, cutting work force/expences or increasing sales.....

Nick-

[makemineatwostroke]

Just a way to reduce their instrest rate probably borrowed money at 1% over prime when it 5.25% today the prime is 2.25% huge saving look for more large corporation's to do the same if banks don't work with them  there is a lot of businesses at the end of their credit line right now,think of what  you do if no back bills have to be paid for 5 months                  have a great day

[mak]

MCI does build the best bus on the road. At least thats my 2 cents

[ktmossman]

Looks like they did two things to benefit their cash flow:

1.) Re-negotiated debt with the lenders.  If I owe $25 to Joe, I go to Joe and say, "Joe, I'm in deep @#$% and we're about to go under.  I'm offering you $15 now to pay clear the debt.  You can accept that or get in line at the bankruptcy court and hope to get pennies."  Individuals do this all the time.  In fact, many of the "consumer credit counseling" services are built around this concept.  They go to the credit card companies and offer them a reduced settlement to avoid them losing the entire amount in a bankruptcy.  Most creditors will accept "something" over "nothing" especially if they have the continued opportunity to make more money from you down the road.

2.) They reduced their interest rate on their debt, again, negotiated with the lenders.  If I am paying $100 million just in interest every year on my debt, and I can get the creditor to agree to a lower rate so that I am only paying $50 million in interest, I have freed up $50 million in cash for operations and debt reduction.  Again, something individuals do all the time, especially with "consumer credit counseling" services.  They get the CC companies to reduce the interest rate so that you can actually make your payments AND pay off principal with your limited cash flow.  Beats losing the entire debt in bankruptcy.

From what the article said, it looks like they gave some creditors shares of the company in return for these considerations, which makes sense to me.  It gives the creditor something as incentive for restructuring the debt.  It also gives the creditor a vested interest in making sure the company succeeds.  If the company fails, the creditor loses.  So, future activities with the lender now have additional incentive as well.

It seems like the CEO of MCI has his head on straight.  He looked bad economic times in the face and made some difficult but smart decisions to make sure the company survives.  Oddly enough, it is the kind of thing that makes investors and the stock market look favorably on a company even though it is going through a bankruptcy.

[David Anderson]

Gee, didn't the Federal Reserve bail them out, yet?  That seems to be the new gov't entitlement program these days.