================================================================= ANCHOR GLASS BANKRUPTCY NEWS Issue Number 1 ----------------------------------------------------------------- Copyright 2005 (ISSN XXXX-XXXX) August 9, 2005 ----------------------------------------------------------------- Bankruptcy Creditors' Service, Inc. 215-945-7000 FAX 215-945-7001 ----------------------------------------------------------------- ANCHOR GLASS BANKRUPTCY NEWS is published by Bankruptcy Creditors' Service, Inc., 572 Fernwood Lane, Fairless Hills, Pennsylvania 19030, on an ad hoc basis (generally every 10 to 20 days) as significant activity occurs in the Debtor's case. New issues are prepared by Psyche A. Castillon, Christopher G. Patalinghug, Frauline S. Abangan and Peter A. Chapman, Editors. Subscription rate is US$45 per issue. Any re-mailing of ANCHOR GLASS BANKRUPTCY NEWS is prohibited. ================================================================= IN THIS ISSUE ------------- [00000] HOW TO SUBSCRIBE TO ANCHOR GLASS BANKRUPTCY NEWS [00001] BACKGROUND & DESCRIPTION OF ANCHOR GLASS CONTAINER CORP. [00002] ANCHOR GLASS' BALANCE SHEET AT MARCH 31, 2005 [00003] COMPANY'S PRESS RELEASE ANNOUNCING CHAPTER 11 FILING [00004] ANCHOR GLASS' CHAPTER 11 DATABASE [00005] LIST OF ANCHOR GLASS' 20 LARGEST UNSECURED CREDITORS [00006] DEBTOR'S MOTION FOR AUTHORITY TO USE CASH COLLATERAL [00007] DEBTOR'S MOTION TO OBTAIN $115,000,000 OF DIP FINANICNG [00008] DEBTOR'S MOTION TO PAY $6,700,000 CRITICAL VENDOR CLAIMS KEY DATE CALENDAR ----------------- 08/08/05 Voluntary Petition Date 08/23/05 Deadline for filing Schedules of Assets and Liabilities 08/23/05 Deadline for filing Statement of Financial Affairs 08/23/05 Deadline for filing Lists of Leases and Contracts 08/28/05 Deadline to provide Utilities with adequate assurance 10/07/05 Deadline to make decisions about lease dispositions 11/06/05 Deadline to remove actions pursuant to F.R.B.P. 9027 12/06/05 Expiration of Debtor's Exclusive Plan Proposal Period 02/04/06 Expiration of Debtor's Exclusive Solicitation Period 08/07/06 Maturity Date of DIP Financing Facilities 08/08/07 Deadline for Debtor to Commence Avoidance Actions Organizational Meeting with UST to form Committees First Meeting of Creditors pursuant to 11 USC Sec. 341 Bar Date for filing Proofs of Claim ----------------------------------------------------------------- [00000] HOW TO SUBSCRIBE TO ANCHOR GLASS BANKRUPTCY NEWS ----------------------------------------------------------------- ANCHOR GLASS BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtor's chapter 11 proceeding. The subscription rate is US$45 per issue. Newsletters are delivered via e-mail; invoices, transmitted following publication of each newsletter issue, arrive by fax. Re-mailing of ANCHOR GLASS BANKRUPTCY NEWS is prohibited. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. To continue receiving ANCHOR GLASS BANKRUPTCY NEWS, please complete the form below and return it by fax or e-mail to: Bankruptcy Creditors' Service, Inc. 572 Fernwood Lane Fairless Hills, PA 19030 Telephone (215) 945-7000 Fax (215) 945-7001 E-mail: peter@bankrupt.com We have published similar newsletters tracking billion-dollar insolvency proceedings since 1990, starting with Federated Department Stores. Currently, we provide similar coverage about the restructuring proceedings involving Allied Holdings, Inc., Collins & Aikman Corporation, Meridian Automotive Systems, Inc., Tower Automotive Inc., Federal-Mogul Corporation, Saint Vincent Catholic Medical Centers, Integrated Health Services, Mariner Post-Acute & Mariner Health, VARIG, S.A., ATA Airlines, US Airways, UAL Corporation and United Airlines, Air Canada, TECO Energy Inc.'s Panda Gila River and Union Power subsidiaries, Winn-Dixie Store, Inc., Kmart Corp., Ames Department Stores, Spiegel, Inc. (and its Eddie Bauer and Newport News subsidiaries), Yukos Oil Company, Mirant Corp., PG&E National Energy Group, Pacific Gas and Electric Company, Enron Corp., NRG Energy, ANC Rental, the Roman Catholic Church in the United States, Trump Hotels & Casino Resorts, Inc., Interstate Bakeries Corporation, Pegasus Satellite, RCN Corporation, Adelphia Communications and Adelphia Business Solutions, WorldCom, Global Crossing and Asia Global Crossing, Winstar, 360networks, Solutia, W.R. Grace & Co., Owens Corning, Armstrong World Industries, USG Corporation, Safety-Kleen, Laidlaw, Parmalat Finanziaria, S.p.A., Vlasic Foods, Bethlehem Steel, Kaiser Aluminum, WestPoint Stevens, Pillowtex, Burlington Industries, Hayes Lemmerz, Exide Technologies, National Century Financial Enterprises, American Business Financial Services, Inc., Reliance Group Holdings & Reliance Financial, The FINOVA Group, Inc., and Loewen Group. ================================================================= [ ] YES! Please enter my personal subscription to ANCHOR GLASS BANKRUPTCY NEWS at US$45 per issue until I tell you to cancel my subscription. Name: ---------------------------------------------- Firm: ---------------------------------------------- Address: ---------------------------------------------- ---------------------------------------------- Phone: ---------------------------------------------- Fax: ---------------------------------------------- E-Mail: ---------------------------------------------- (Distribution to multiple professionals at the same firm is provided at no additional cost.) ANCHOR GLASS BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtor's chapter 11 proceeding. The subscription rate is US$45 per issue. Newsletters are delivered via e-mail; invoices, transmitted following publication of each newsletter issue, arrive by fax. Re-mailing of ANCHOR GLASS BANKRUPTCY NEWS is prohibited. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. ----------------------------------------------------------------- [00001] BACKGROUND & DESCRIPTION OF ANCHOR GLASS CONTAINER CORP. ----------------------------------------------------------------- ANCHOR GLASS CONTAINER CORPORATION One Anchor Plaza 4343 Anchor Plaza Parkway Tampa, Florida 33634 Telephone (813) 884-0000 Fax (813) 887-5735 anchorglass.com (registered but not active) Behind Owens-Illinois and Saint-Gobain Containers, Anchor Glass Container Corporation is the third-largest manufacturer of glass containers in the United States. Anchor manufactures a diverse line of flint (clear), amber, green and other colored glass containers for the beer, beverage, food, liquor and flavored alcoholic beverage markets. Anchor's Customers Anheuser-Busch Companies, Inc., accounting for 48.1% of 2004 sales, is Anchor Glass' largest customer. Anchor's next nine- largest customers are: * Cadbury-Schweppes, * Diageo, Plc, * Saxco International, * Heaven Hill Distillers, Inc., * Kraft Foods, * Jim Beam Brands, * Jarden, * LiDestri Foods, Inc., and * Hiram Walker. In the aggregate, sales to these Top 10 Customers amount for nearly 80% of Anchor's 2004 sales. Anchor says the loss of one of these significant customers, if not replaced, would have a material adverse effect on the Company's business and finances. Over 75% of Anchor's 2004 shipments were sold under customer contracts with average three-year terms. On January 1, 2004, Anchor Glass began shipping under a multi- year supply agreement with Snapple Beverage Group, Inc. and Mott's Inc., affiliates of Cadbury Schweppes plc, to supply nearly 100% of their requirements for 16 oz. Snapple bottles, Nantucket Nectars and Yoo-hoo bottles, as well as for several Mott's items. Sales under this agreement accounted for 12.9% of Anchor Glass' 2004 sales. Manufacturing Process Anchor operates eight manufacturing facilities: Number of Number of Building Area Location Furnaces Machines (Square Feet) -------- --------- --------- ------------- Jacksonville, Florida 2 4 624,000 Warner Robins, Georgia 2 8 864,000 Lawrenceburg, Indiana 1 4 504,000 Winchester, Indiana 2 6 627,000 Shakopee, Minnesota 2 6 360,000 Salem, New Jersey 3 6 733,000 Elmira, New York 2 6 912,000 Henryetta, Oklahoma 2 6 664,000 In addition to these locations, the Company owns plants at Connellsville, Pennsylvania (closed November 2004), Keyser, West Virginia and Dayville, Connecticut that have been closed and owns land in Gas City, Indiana. The Eight Manufacturing Facilities are located in geographic proximity to its customers to minimize cost of transportation and to speed up delivery. Most of the Company's production is shipped by common carrier to customers generally within a 150- mile radius of the plant in which it is produced, although the Company will ship products longer distances to meet customer requirements. The glass container manufacturing process involves a high percentage of fixed costs. Sand, soda ash, limestone, cullet (reclaimed glass), corrugated packaging materials and energy, primarily natural gas, are the principal raw materials that are used in the Company's manufacturing operations. Anchor Glass is not dependent upon any single supplier for any of these materials. Costs for soda ash have risen significantly in 2005. All of the Company's glass melting furnaces are equipped to burn natural gas, which is the primary fuel used at the Company's manufacturing facilities. Two of the Company's furnaces are equipped to utilize oxygen in conjunction with the burning of natural gas, increasing the overall efficiency of the furnace. Backup systems are in place at some facilities to permit the use of fuel oil or propane, to the extent cost effective and permitted by applicable laws and regulations. Electricity is used in certain instances for enhanced melting. Prices for natural gas have increased significantly in recent years, and natural gas is one of the largest cost components of the Company's operations. Glass Container Industry The glass container industry in the United States is a mature, low-growth industry. Anchor Glass and the other glass container manufacturers compete on the basis of price, quality, reliability of delivery and customer service. Owens-Brockway Glass Container Inc. (a wholly owned subsidiary of Owens-Illinois Group, Inc.), Saint-Gobain Containers Co. (a wholly owned subsidiary of Compagnie de Saint-Gobain formerly known as Ball-Foster Galss Container Co., L.L.C.) and Anchor Glass control 90% of the U.S. glass container market. Anchor's Workforce Anchor Glass employs approximately 2,800 workers on a full-time basis. Approximately 450 of these employees are salaried office, supervisory and sales personnel. The remaining employees are represented principally by two unions: the Glass Molders, Pottery, Plastics and Allied Workers and the United Steelworkers of America. Intellectual Property Anchor Glass operates under a ten-year contract with Heye-Glas International, expiring December 31, 2011, that provides it with heat extraction technology for its forming machines. Anchor Glass also has a limited license with Owens-Illinois entitling the Company to use certain existing patents, trade secrets and other technical information of Owens-Illinois relating to glass manufacturing technology. Under this license, the Company has the right to use technology in place in exchange for license fees payable through 2005 and thereafter will have a perpetual paid-up license. While the Company owns a portfolio of miscellaneous patents, trademarks and copyrights, Anchor doesn't believe its business is dependent upon any one of these. Restructuring Anchor Glass filed for Chapter 11 bankruptcy protection on April 15, 2002. The U.S. Bankruptcy Court for the District of Delaware confirmed the company's Amended Plan of Reorganization on August 8, 2002, and the Company emerged from chapter 11 on August 30, 2002, that delivered equity in the reorganized company to affiliates of investment firm Cerberus Capital Management, L.P. In September 2003, Anchor Glass completed an IPO. Cerberus affiliates own a 60% stake in Anchor Glass. Anchor Glass' current debt load is comprised of: $63,500,000 -- Wachovia Revolving Credit Facility 15,370,000 -- Madeleine L.L.C. Revolving B Loan 368,303,000 -- 11% Senior Secured Notes 2,953,000 -- Unamortized Premium on Senior Secured Notes 10,055,000 -- Capital Lease Obligations 56,570,000 -- Pension Benefit Guarantee Corporation 50,000,000 -- Trade Debt Anchor Glass says that "dramatic and unexpected increases" in energy, freight and and raw material costs in 2004 and 2005, coupled with an inability to contractually pass those costs along to its customers on a current basis and a reduction in the glass industry volume, created a significant strain on its cash flow and made it impossible to service its substantial debt. Anchor Glass says that it intends to use the chapter 11 process this time to "reject unprofitable contracts, curtail production to some extent, and restructure its debt." ----------------------------------------------------------------- [00002] ANCHOR GLASS' BALANCE SHEET AT MARCH 31, 2005 ----------------------------------------------------------------- ANCHOR GLASS CONTAINER CORPORATION CONDENSED BALANCE SHEETS At March 31, 2005 (unaudited) ASSETS Current assets: Cash and cash equivalents $127,000 Accounts receivable 49,539,000 Inventories: Raw materials and manufacturing supplies 27,356,000 Finished products 98,208,000 Other current assets 12,255,000 ------------ Total current assets 187,485,000 Property, plant and equipment, net 453,971,000 Other assets 14,226,000 Intangible assets 5,858,000 ------------ $661,540,000 ============ LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Borrowings under revolving credit facilities $71,242,000 Current maturities of long-term debt 9,458,000 Accounts payable 61,217,000 Accrued expenses 23,796,000 Accrued interest 5,533,000 Accrued compensation and employee benefits 26,280,000 ------------ Total current liabilities 197,526,000 Long-term debt 409,966,000 Long-term post-retirement liabilities 40,942,000 Other long-term liabilities 18,128,000 ------------ 469,036,000 Stockholders' deficit: Common stock 2,468,000 Capital in excess of par value 127,721,000 Accumulated deficit (137,484,000) Accumulated other comprehensive income (loss) 2,273,000 ------------ (5,022,000) ------------ $661,540,000 ============ ----------------------------------------------------------------- [00003] COMPANY'S PRESS RELEASE ANNOUNCING CHAPTER 11 FILING ----------------------------------------------------------------- Anchor Glass Files Voluntary Chapter 11 TAMPA, Florida -- August 8, 2005 -- Anchor Glass Container Corporation (NASDAQ:AGCC) announced today that the Company filed a voluntary petition for reorganization under Chapter 11 of the US Bankruptcy Code in the Middle District of Florida, Tampa Division. The Company said that it intends to request Court approval to continue payments of employee salaries and continue health and welfare benefits to current employees without disruption. The Company's existing senior secured credit facility lenders have agreed to convert their loan facility into a debtor- in-possession facility in order for the Company to continue its operations. The Company is in discussions to obtain additional debtor-in-possession financing that it believes will be required after the existing facility is fully utilized. Anchor also announced that Mark Burgess, who joined Anchor in May 2005 as Executive Vice President, Finance and CFO, has been appointed the Chief Executive Officer of the Company effective immediately. Mr. Burgess stated that, "The Chapter 11 process will give the Company the opportunity to restructure its finances while it continues to operate its business." In addition Mr. Burgess said, "Anchor's goal is to continue delivering quality products to its existing customer base without interruption and to maintain its relationships with its suppliers." ----------------------------------------------------------------- [00004] ANCHOR GLASS' CHAPTER 11 DATABASE ----------------------------------------------------------------- Debtor: Anchor Glass Container Corporation One Anchor Plaza 4343 Anchor Plaza Parkway Tampa, Florida 33634 Bankruptcy Case No.: 05-15606 Chapter 11 Petition Date: August 8, 2005 Court: United States Bankruptcy Court Middle District of Florida Sam M. Gibbons United States Courthouse 801 N. Florida Avenue, 16th Floor Tampa, Florida 33602 Telephone (813) 301-5065 Judge: The Honorable Alexander L. Paskay Debtor's Bankruptcy Counsel: Robert A. Soriano, Esq. Carlton Fields PA P.O. Box 3239 Tampa, Florida 33601 Telephone (813) 223-7000 Debtor's Special Counsel: Cahill Gordon & Reindell LLP Debtor's Financial Advisor: Houlihan, Lokey, Howard & Zukin United States Trustee: Office of the U.S. Trustee Timberlake Annex, Suite 1200 501 E. Polk Street Tampa, Florida 33602 Telephone (813) 228-200 ----------------------------------------------------------------- [00005] LIST OF ANCHOR GLASS' 20 LARGEST UNSECURED CREDITORS ----------------------------------------------------------------- Creditor Amount of Claim -------- --------------- Pension Benefit Guaranty Corporation 1200 K Street NW, Suite 270 Washington, DC 20005-4026 $56,570,000 Anchor Glass Container ERISA Excess Plan 4343 Anchor Plaza Pkwy. Tampa, FL 33634-751 $3,949,155 Temple-Inland 1300 S. Mopac Expwy. Austin, TX 78746 $1,351,000 City of Warner Robins P.O. Box 1468 Warner Robins, GA 31099 $1,149,000 South Jersey Gas Company P.O. Box 6000 Folsom, NJ 08037 $1,113,000 Packaging Dimensions - Fibre 2300 Raddant Rd., Suite B Aurora, IL 60504 $992,700 Georgia Power Company 96 Annex Atlanta, GA 30396 $929,600 Unimin Corp 258 Elm St. New Canaan, CT 06840 $871,600 UGI Energy Services, Inc. P.O. Box 827032 Philadelphia, PA 19182 $850,000 Special Shapes Refractory Drawer 151 P.O. Box 830769 Bessemer, AL 35022 $765,600 American Electric Power P.O. Box 24412 Canton, OH 44701 $697,800 Pepco Energy Services 1300 N. 17th St., Suite 1600 Arlington, VA 22209 $689,100 Heye-Glas International Am Ziegeleiweg 3 Obernkirchen, DE D-31683 West Germany $633,500 King Industries P.O. Box 2445 Columbus, GA 31902 $616,200 OCI Chemical Corp P.O. Box 67000 Dept 255801 Detroit, Ml 48267-2558 $614,100 Centerpoint Energy P.O. Box 3032 Carol Stream, IL 60132 $580,000 Owens Brockway Glass Container One Seagate - 30 LDP Toledo, OH 43666 $553,000 GMP and Employers Pension Plan 205 West 4th St., Suite 225 Cincinnati, OH 45202 $550,000 Schulte Roth & Zabel LLP 919 Third Ave New York, NY 10022 $543,300 Geary Energy, LLC 7712 S. Yale Ave., Suite 201 Tulsa, OK 74136 $516,000 ----------------------------------------------------------------- [00006] DEBTOR'S MOTION FOR AUTHORITY TO USE CASH COLLATERAL ----------------------------------------------------------------- Anchor Glass Container Corporation and Wachovia Capital Finance Corporation (Central) as agent for certain lenders are parties to a revolving credit facility secured by a first priority lien on among other assets, the Debtor's accounts and inventory. Under the Wachovia Facility, Wachovia advances to the Debtor 85% of eligible accounts and 60% of eligible inventory. Madeleine, LLC, holds a junior prepetition lien on the same accounts and inventory. As of the Petition Date, the Debtor has these obligations: Wachovia Capital Finance $63,500,000 Trade indebtedness 50,000,000 Madeleine L.L.C. - Revolving B Loan 15,370,000 11% Senior Secured Notes (plus interest) 368,303,000 Unamortized premium on Senior Secured Notes 2,953,000 Capital lease obligations 10,055,000 Unsecured obligation under a PBGC Agreement 56,570,000 Robert A. Soriano, Esq., at Carlton Fields PA, in Tampa, Florida, tells the Court that unless authorized to use cash collateral subject to Madeleine's junior liens, the Debtor will not have sufficient liquidity to sustain its business functions at or near levels required to optimize its operational and financial performance, which will result in immediate and irreparable harm to the Debtor's creditors and its estate. "Specifically, the Debtor's manufacturing and distribution operations require sufficient levels of working capital to fund and support ordinary business expenditures, including payroll, the purchase of raw materials and other overhead expenditures," Mr. Soriano says. The Debtor plans to enter into a postpetition financing arrangement with Wachovia to further address its liquidity problems. The Debtor prepared a budget, which it believes is achievable and will allow it to operate in Chapter 11 without the accrual of unpaid administrative expenses: Anchor Glass Container Corporation Cash Flow Forecast For the Period From Aug. 7 to Oct. 23, 2005 Total Receipts $149,529,000 Vendors/Utilities/Freight 77,346,000 Repairs and Maintenance 2,759,000 Other Material Expenses/Services 7,049,000 Leases/Rent 1,109,000 Salaries, Wages 25,388,000 Payroll Taxes & Benefits 21,098,000 401K Contribution 1,048,000 Travel and Expenses 265,000 Checks Outstanding/AP Adjustment 1,464,000 Capacity Curtailment Initiative (2,129,000) (Opportunities)/Risks 1,224,000 Deposits 3,000,000 ------------ Total Disbursements 139,623,000 ------------ Capital Expenditures 6,780,000 ------------ Professional/Restructuring Expense 3,299,000 Interest Payments/Financing Fees 1,551,000 Financing Cash(Inflows)/Outflows (5,000,000) DIP Fees 1,150,000 ------------ Total Disbursements $149,702,000 ------------ Net Inflows/(Outflows) ($173,000) ============ By this motion, the Debtor asks the Court for permission to use cash collateral subject to Madeleine's junior liens. The Debtor also asks Judge Paskay to grant Madeleine replacement liens as adequate protection. ----------------------------------------------------------------- [00007] DEBTOR'S MOTION TO OBTAIN $115,000,000 OF DIP FINANICNG ----------------------------------------------------------------- Robert A. Soriano, Esq., at Carlton Fields PA, in Tampa, Florida, relates that the Debtor does not have sufficient available sources of working capital to operate its businesses in the ordinary course of its business. "The Debtor's ability to maintain business relationships with its vendors, suppliers, and customers, to pay its employees, and to otherwise fund its operations is essential to the Debtor's continued viability." Accordingly, Mr. Soriano says, the Debtor needs to obtain postpetition financing immediately to continue operating its businesses, to minimize the disruption of its business operations, and to manage and preserve the assets of its estate in order to maximize the recovery to all estate creditors. Prepetition Debt Structure Prior to the Petition Date, Anchor Glass entered into a Loan and Security Agreement dated August 30, 2002, and all related other agreements, documents and instruments, with Wachovia Capital Finance Corporation (Central) as agent for certain lenders. Bank of America, N.A., acted as documentation agent while General Electric Capital Corporation acted as lead bookrunner and syndication agent. The total availability under that facility is $115,000,000, subject to borrowing base criteria. The Debtor also obtained loans, advances and other financial accommodations from Madeleine L.L.C., as agent pursuant to a Loan and Security Agreement dated February 14, 2005. The total availability under that loan is $20,000,000. The Debtor's obligations under the Madeleine Facility are secured by certain of the Debtor's assets and other property interests, including junior liens on the Debtor's accounts and inventory. Anchor issued 11% Senior Secured Notes due 2013 in the original aggregate principal amount of $300,000,000 pursuant to an Indenture dated February 7, 2003, by and between The Bank of New York, as collateral agent and trustee for the holders of the Senior Secured Notes, and Anchor, as issuer. The Senior Secured Notes are secured by certain of the Debtor's real property, equipment, fixed assets and other property interests. Wachovia and Madeleine entered into an Intercreditor Agreement dated February 14, 2005, which sets forth their rights, obligations, and priorities of their claims and interests with respect to the Collateral. Wachovia (or its predecessor) and The Bank of New York entered into a Collateral Access and Intercreditor Agreement dated February 7, 2003, which sets forth: (1) their rights, obligations and priorities with respect to the Note Collateral and the Revolving Loan Collateral; and (2) Wachovia's right to use the Debtor's real property and equipment in connection with the exercise of Wachovia's rights and remedies with respect to the Revolving Loan Collateral. As of the Petition Date, the Debtor owes Wachovia $63,500,000, plus all interest, fees, costs and expenses under the Wachovia Facility. The Debtor owes Madeleine $15,370,000. The Wachovia Prepetition Obligations were fully secured by prior priority security interests and liens granted by the Debtor to Wachovia, for the benefit of itself and the other Lenders, upon all of the Collateral existing as of the Petition Date. Postpetition Financing According to Mr. Soriano, the Debtor is unable to procure financing in the form of unsecured credit allowable under Section 503(b)(1) of the Bankruptcy Code, as an administrative expense under Section 364(a) or (b) of the Bankruptcy Code, or in exchange for the grant of an administrative expense priority pursuant to Section 364(c)(1) without the grant of liens on assets. The Debtor has requested from Wachovia, and Wachovia is willing to extend, certain loans, advances and other financial accommodations, on the terms and conditions set forth in the Wachovia Loan Documents, as amended and ratified by a Ratification and Amendment Agreement. Mr. Soriano tells Judge Paskay that the Debtor has been unable to procure the necessary financing on terms more favorable than the financing offered by Wachovia and the Lenders. In addition, the Debtor has negotiated additional financing in the amount of $15,000,000 to be provided by certain parties to the Noteholder Agreements. Under the Ratification and Amendment Agreement, the Debtor ratifies, assumes, adopts and agrees to be bound by the Existing Financing Agreements, as modified, and agrees to pay all of the Prepetition Obligations. Anchor Glass acknowledges that it is indebted to Wachovia and the Lenders for the Prepetition Obligations, as of August 8, 2005, in the aggregate principal amount of not less than $81,467,463, consisting of: (a) Loans made pursuant to the Existing Financing Agreements in the principal amount of not less than $67,267,346, together with all interest accrued and accruing; and (b) Letter of Credit Accommodations not less than $14,200,117, together with interest accrued and accruing, plus costs, expenses, fees and all other charges. As collateral security for the prompt performance, observance and payment in full of all of the Obligations, the Debtor grants, pledges and assigns to Wachovia, for itself and the ratable benefit of Lenders, and also confirms, reaffirms and restates the prior grant of continuing security interests in and liens upon, and rights of setoff against, all of the Collateral. The Debtor will pay to Wachovia a $575,000 facility fee for arranging the financing. The Debtor will also pay to Wachovia for the account of Lenders a $575,000 fee to be shared based on the pro rata share of commitments of Lenders for providing the financing arrangements. The Debtors will pay 350 basis points over the Prime Rate for all domestic loans and 325 basis points over an Adjusted Eurodollar Rate for all Eurodollar Loans. Any Loans available to Anchor Glass will be subject to a special Reserve, in an amount equal to all claims for all outstanding and unpaid administrative expenses, which are or may be senior or pari passu to Agent's and Lenders' liens in the property of the Borrower or Agent's and Lenders' super priority claims. In addition to any charges, fees or expenses charged by any bank or issuer in connection with the Letter of Credit Accommodations, Borrower will pay to Agent, for the benefit of Lenders, a letter of credit fee at a rate equal to 2.50% per annum, payable in arrears; except that Agent may, and upon the written direction of Required Lenders, require Borrower to pay 4.50% per annum on the daily outstanding balance in case of termination or default. All limits and sublimits will be determined on an aggregate basis considering together both the Prepetition Obligations and the Postpetition Obligations. The Loan Agreement will continue in full force and effect for a term ending on August 7, 2006, unless terminated earlier. Mr. Soriano assures the Court that the terms of the Wachovia Loan Documents, the Ratification Agreement and Debtor's DIP Financing Motion: -- are fair, just and reasonable under the circumstances, -- are ordinary and appropriate for secured financing to debtors-in-possession, -- reflect the Debtor's exercise of its prudent business judgment consistent with its fiduciary duties, and -- are supported by reasonably equivalent value and fair consideration. "The terms of the Wachovia Loan Documents and the Ratification Agreement have been negotiated in good faith and at arms' length by and among the Debtor, Agent and the Lenders, with all parties represented by counsel," Mr. Soriano continues. Interim Approval On an interim basis at yesterday's First Day Hearing, Judge Paskay authorized the Debtor to immediately borrow and obtain Loans and Letter of Credit Accommodations, and to incur indebtedness and obligations owing to Agent and Lenders, in amounts as may be made available; provided that pending final approval, the aggregate outstanding amount of those Loans and Letter of Credit Accommodations will not exceed $95,000,000, which amount is inclusive of all Prepetition Obligations. Judge Paskay permits the Debtor to execute, deliver, perform and comply with all of the terms, conditions and covenants of the Loan Agreement and other related Financing Agreements. The Debtor is authorized and directed to pay its Prepetition Obligations. To secure the prompt payment and performance of any and all Debtor's obligations, Wachovia, for itself and for the benefit of the other Lenders, will have and is granted, effective as of the Petition Date, valid and perfected first priority security interests and liens, superior to all other liens, claims and security interests that any creditor of the Debtor's estate may have in and upon all of the Prepetition Collateral and Postpetition Collateral. For all Obligations, Wachovia is also granted an allowed superpriority administrative claim. Wachovia's and Lenders' liens, claims and security interests in the Collateral and its Superpriority Claim will be subject to the right of payment of fees payable to the U.S. Trustee and the Clerk of the Bankruptcy Court. In Wachovia's sole discretion, it may establish an Availability Reserve against the amount of Loans and other credit accommodations that would otherwise be made available to Anchor Glass in respect of the Carve Out Expenses. The automatic stay is modified to: -- implement the postpetition financing arrangements, -- take any act to create, validate, evidence, attach or perfect any lien, security interest, right or claim in the Collateral, and -- assess, charge, collect, advance, deduct, and receive payments with respect to the Obligations. Full-text copies of the Interim Order and the Ratification and Amendment Agreement are available for free at: http://bankrupt.com/misc/anchorinterimorder.pdf Final Hearing on August 30 The Court will convene the Final Hearing on the DIP Financing Motion on August 30, 2005, at 1:30 p.m. Objections must be filed and served by August 22, 2005. Wachovia is represented by Jonathan N. Helfat, Esq., at Otterbourg, Steindler, Houston & Rosen, P.C., in New York. Madeleine L.L.C. is represented by Jesse H. Austin, III, Esq., at Paul, Hastings, Janofsky & Walker LLP, in Atlanta, Georgia. David H. Botter, Esq., and Ira Dizengoff, Esq., at Akin Gump Strauss Hauer & Feld LLP are counsel to the Ad Hoc Committee of Noteholders. ----------------------------------------------------------------- [00008] DEBTOR'S MOTION TO PAY $6,700,000 CRITICAL VENDOR CLAIMS ----------------------------------------------------------------- The continued availability of trade credit in amounts and on terms consistent with those Anchor Glass Container Corporation enjoyed is clearly of benefit to the Debtor in that it will permit it to maintain liquidity for its business operations, Robert A. Soriano, Esq., at Carlton Fields, P.A., in Tampa, Florida, tells Judge Paskay. Preserving working capital through the retention or reinstatement of traditional trade credit terms will enable it to maintain its competitiveness and maximize the value of its business for the benefit of the Debtor, its estate and creditors. A deterioration of trade credit and a disruption or cancellation in the delivery of goods -- many of which are not readily replaceable -- may cripple the Debtor's business operations, increase the amount of funding needed by the Debtor postpetition, and ultimately hamper Anchor's ability to service its customers. In this regard, the Debtor seeks the Court's authority to pay, in its discretion, uncontested prepetition claims of its essential vendors. Anchor Glass wants to pay these 23 Critical Vendors' Claims: Critical Vendor Prepetition Claim --------------- ----------------- Acme Packaging $166,398 Arkema Chemicals 137,521 Arkhola Sand & Gravel Company 86,478 Bostik 89,413 Buske 1,505,799 The Calumite Company 85,279 Carthage Crushed Limestone 44,435 Cornerstone Environmental 34,462 FMC Corporation 283,574 Franklin Industrial Minerals 22,812 Heye International 380,669 Modern Transportation Inc 409,213 Nutmeg (Hudson Baylor Corporation) 166,750 OCI Chemical Corporation 954,939 O-N Minerals (Chemstone) 113,285 Prior Chemical Corporation 45,605 Rogers Group 7,386 Shamokin Filler Company 6,782 Strategic Materials Inc 124,287 TC Transport Inc 60,756 Ultra Logistics 945,213 Unimin Corporation 974,162 Walpole Inc 32,867 ---------- TOTAL $6,678,085 ========== Mr. Soriano says these Critical Vendor Claims represent less than 2% of the Debtor's total liabilities as of the Petition Date. Mr. Soriano notes that the payment of Critical Vendor Claims will likely avert the filing of many reclamation claims, suits, liens and motions by claimants seeking payment of or priority for their claims on a variety of goods. "Avoiding the time, distraction, and considerable expense of litigating the merits of such claims will benefit Anchor, its estate and creditors while facilitating the administration of this case," Mr. Soriano says. Mr. Soriano also points out that the Critical Vendors would themselves be significantly damaged by Anchor's failure to pay prepetition claims, resulting in Anchor being forced to obtain goods and services elsewhere that would be at a higher price or not of the quality required by the Debtor. Numerous other courts have used their powers under Section 105(a) of the Bankruptcy Code to authorize payment of a debtor's prepetition obligation where the payment is an essential element of the preservation of the debtor's potential for rehabilitation, Mr. Soriano reminds Judge Paskay. Section 105(a) grants broad authority to bankruptcy courts to enforce the provisions of the Bankruptcy Code under equitable common law doctrines. The U.S. Bankruptcy Court for the Middle District of Florida considered and granted a critical vendor motion in In re Tropical Sportswear Int'l. Corp., 320 B.R. 15 (Bankr. M.D. Fla. 2005), citing that the payments were necessary to the reorganization process, sound business justification existed in that the critical vendors refused to continue to do business with the debtor absent being afforded critical vendor status, and that disfavored creditors are at least as well off as they would have been had the critical vendor order not been entered. Other cases addressing the payment of prepetition debts owed to critical vendors include: -- In re Gulf Air, Inc., 112 B.R. 152 (Bankr. W.D. La. 1989), which cited the Middle District of Florida Bankruptcy Court's decision in In re Braniff Airways and its decision to allow payment of prepetition wage and employee claims; -- In re COSERV, LLC, 273 B.R. 487, 497 (Bankr. N.D. Tex. 2002), which cited the debtor's obligation as a fiduciary to protect and preserve the going concern value of the debtor's estate as a justification for allowing the payment of $8,000,000 of prepetition vendor claims; -- In re Lehierh & New England Rv. Co., 657 F.2d 570.581 (3d Cir. 1981), which cited the doctrine of necessity which permits "immediate payment of claims of creditors where those creditors will not supply services or materials essential to the conduct of the business until their pre-reorganization claims shall have been paid"; -- In re Ionosphere Clubs, Inc., 98 B.R. 174, 175 (Bankr. S.D.N.Y. 1989 ), where the court used equitable powers to "authorize payment of prepetition debt when such payment is needed to facilitate the rehabilitation of the debtor"; -- In re Just for Feet, Inc., 242 B.R. 821, 825 (D. Del. 1999); and -- In re Kmart Corporation, 359 F.3d 866 (7th Cir. 2004). This is Anchor's second bankruptcy filing in three years. It is imperative that Anchor make a strong statement to its critical vendors and customers by paying those trade vendors and supplying products on time as usual, Mr. Soriano asserts. This will also ensure that Anchor will be able to sustain operational levels necessary to fund its reorganization plan, he adds. *** End of Issue No. 1 ***