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Foamex files for chapter 11, says it aims to restructure

By Liz White, UT staffLinwood, Pennsylvania-Major US foamer Foamex International Inc. announced 19 Sept that it has gone into chapter 11 bankruptcy protection. Foamex explained that it has been in active negotiations with its key creditors, and has agreed terms for a proposed reorganisation with an ad-hoc committee that holds a majority of the company’s senior secured notes. “We believe this plan represents the best opportunity for Foamex to restructure its debt in an effective and timely manner,” said Tom Chorman, president and ceo. “The chapter 11 process will allow Foamex to gain immediate liquidity and continue operating without interruption, while giving us the opportunity we need to restructure our balance sheet, strengthen our business performance and create long-term value.”In principle, the agreement with creditors would allow significant deleveraging of Foamex’s balance sheet, the group said. This would result in improvements to the company’s capital structure and profitability, Foamex added. Foamex said the filings do not affect its foreign operations.”We expect to emerge from this process as quickly as possible with a more appropriate capital structure that will allow us to be a healthier, more competitive company, Chorman added. Foamex is also seeking bankruptcy court approval of up to $240 million in revolving credit debtor-in-possession financing through Bank of America, NA. This financing, plus cash flow from operations, would provide the foam-making group with sufficient liquidity to for operating expenses, the company said. This would in turn allow Foamex to pay certain pre-petition obligations, including those owing to certain critical suppliers and employees. Bank of America has also committed to provide exit financing for Foamex’s emergence from chapter 11.Foamex said it will use chapter 11 to implement restructuring designed to restore the Company to long-term financial health, while continuing to operate its business as normal. “

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