Western Co. Files Proposal to Reorganize : Chapter 11 Bankruptcy Gives Stock to Creditors

The Western Co. of North America said Monday that it has filed a proposed Chapter 11 reorganization plan with the U.S. Bankruptcy Court for the Northern District of Texas that would give creditors 91.5% of the company’s stock.

“Our proposed plan of reorganization provides our creditors and stockholders a greater recovery than they would receive under any alternative,” said Sheldon R. Erikson, chairman and chief executive officer. “At the same time, the plan of reorganization, if confirmed, will allow Western to remain a strong competitor in the offshore and onshore oil field services industry.”

A group representing the company’s current stockholders, however, immediately issued a statement criticizing the proposed reorganization as “unfair to the common and preferred shareholders.”

“The dilution under the company’s proposed plan will virtually wipe out the existing shareholders, yet will provide advantageous treatment to the bank group and generous benefits to Erikson and other members of Western’s management,” the statement from the Equity Committee said.

Committee Investigating

The committee said it has been “diligently investigating the acts and conduct of the company, including its extraordinary write-down of assets, its relationship with the various members of the bank group and the purchase and sales of stock by insiders.”

Members of the court-appointed Equity Committee said they plan to file a motion this week asking the bankruptcy judge to appoint an examiner to further the investigation.

Under the reorganization plan, existing common and preferred stock of the company would be canceled and 12.5 million new shares of common stock would be issued.

About 72.25% of the new common stock would be issued to existing senior unsecured creditors. Existing senior and junior subordinated debentures would be canceled, and their holders would receive 19.25% of the new common stock.

Existing common and preferred stockholders would be issued 5.5% of the new common stock in substitution for the shares of common and preferred stock they now own. An additional 3% of the new common stock would be issued as part of a management incentive plan.