================================================================= FOAMEX BANKRUPTCY NEWS Issue Number 1 ----------------------------------------------------------------- Copyright 2005 (ISSN XXXX-XXXX) September 21, 2005 ----------------------------------------------------------------- Bankruptcy Creditors' Service, Inc. 215-945-7000 FAX 215-945-7001 ----------------------------------------------------------------- FOAMEX 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 Debtors' cases. 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 FOAMEX BANKRUPTCY NEWS is prohibited. ================================================================= IN THIS ISSUE ------------- [00000] HOW TO SUBSCRIBE TO FOAMEX BANKRUPTCY NEWS [00001] BACKGROUND & DESCRIPTION OF FOAMEX INTERNATIONAL [00002] FOAMEX INTERNATIONAL'S BALANCE SHEET AT JULY 3, 2005 [00003] COMPANY'S PRESS RELEASE ANNOUNCING CHAPTER 11 FILING [00004] FOAMEX INTERNATIONAL'S CHAPTER 11 DATABASE [00005] LIST OF FOAMEX'S 25 LARGEST UNSECURED CREDITORS [00006] DEBTORS' MOTION TO OBTAIN $320,000,000 OF DIP FINANCING [00007] S&P CUTS FOAMEX'S SR. SUBORDINATED NOTES RATINGS TO "D" [00008] FOAMEX RECEIVES COURT APPROVAL OF FIRST DAY MOTIONS KEY DATE CALENDAR ----------------- 09/19/05 Voluntary Petition Date 10/09/05 Deadline to provide Utilities with adequate assurance 10/19/05 Deadline for filing Schedules of Assets and Liabilities 10/19/05 Deadline for filing Statement of Financial Affairs 10/19/05 Deadline for filing Lists of Leases and Contracts 11/18/05 Deadline to make decisions about lease dispositions 12/18/05 Deadline to remove actions pursuant to F.R.B.P. 9027 01/17/06 Expiration of Debtor's Exclusive Plan Proposal Period 03/18/06 Expiration of Debtor's Exclusive Solicitation Period 09/19/07 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 FOAMEX BANKRUPTCY NEWS ----------------------------------------------------------------- FOAMEX 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 Debtors' chapter 11 proceedings. 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 FOAMEX 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. 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Name: ---------------------------------------------- Firm: ---------------------------------------------- Address: ---------------------------------------------- ---------------------------------------------- Phone: ---------------------------------------------- Fax: ---------------------------------------------- E-Mail: ---------------------------------------------- (Distribution to multiple professionals at the same firm is provided at no additional cost.) FOAMEX 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 Debtors' chapter 11 proceedings. 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 FOAMEX 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 FOAMEX INTERNATIONAL ----------------------------------------------------------------- FOAMEX INTERNATIONAL INC. 1000 Columbia Avenue Linwood, Pennsylvania 19061 Tel: (610) 859-3000 http://www.foamex.com/ Foamex International, Inc., is a public holding company that, along with its subsidiaries and affiliates, employs approximately 5,450 people worldwide and maintains 42 domestic and 9 international manufacturing facilities located throughout the United States, Canada and Mexico. The Company believes it is the largest manufacturer of flexible polyurethane and advanced polymer foam products in North America, with annual net sales of approximately $1.3 billion in 2004. Foamex International's domestic operations are conducted through Foamex L.P., in which Foamex International owns a 98.284% limited partnership interest. FMXI, Inc., a wholly owned, non-operating subsidiary of Foamex International, is a 1.716% owner and the general partner of Foamex L.P. The other Debtors -- Foamex Latin America, Inc., Foamex Asia, Inc., Foamex Carpet Cushion LLC, Foamex Capital, Foamex Mexico, Inc., and Foamex Mexico II, Inc. -- are subsidiaries of Foamex L.P. * Foamex Latin America is a holding company and the parent of Foamex Mexico. * Foamex Mexico is an intermediate holding company and the ultimate parent of various nondebtor intermediate holding and operating companies and subsidiaries through which the Debtors conduct business in Mexico. * Foamex Asia is the 70% owner of Foamex Asia Co., Ltd., which is a joint venture through which Foamex conducts business in China, Malaysia, Singapore and Thailand. * Foamex Carpet Cushion is an inactive corporation through which the Debtors previously conducted their carpet underlay business. * Foamex Capital is a financing corporation and is the co- issuer and co-obligor of the 10-3/4% Senior Notes and the Subordinated Notes. * Foamex Mexico II is presently dormant. Strategic Business Units Gregory J. Christian, executive vice president, chief restructuring officer, general counsel and secretary of Foamex International, Inc., relates that the Debtors' operations consist of these business lines or "strategic business units": -- technical products, -- foam products, -- automotive products, and -- carpet cushion products. (1) The Debtors' technical products group produces innovative specialty foam materials and solutions for use in the automotive, consumer, electronic, industrial and medical fields. Its products are found in various consumer and business products, including sponges, band-aids, cleaning brushes and laser and inkjet printers. (2) The Debtors' foam products group, their largest business unit, serves various comfort, industrial and consumer product markets with a mixture of specialty and commodity products. The Debtors' foam products are used primarily in various bedding and furniture items. The Debtors' bedding and furniture products are sold directly to manufacturers as well as through distributors. The Debtors' consumer products are primarily produced for use in juvenile foam furniture and bean bags, compressed, all- foam mattresses and bedding comfort products. (3) The Debtors' automotive products group, their second largest business unit, is one of the largest suppliers of polyurethane foam products to the North American automotive industry. It produces, among other things, foam rolls, flame and adhesive laminated composites, thermoformable foams, acoustical foams, basic foam products, energy absorbing foams and molded seat cushions. The Debtors' automotive foam products are sold through a range of tiers in the automotive industry's supply chain. The Debtors primarily supply Tier 1 system integrators that in turn supply original equipment manufacturers including General Motors, Ford and Daimler Chrysler. (4) The Debtors' carpet cushion segment is primarily a by- product business utilizing the scrap foam generated by the foam manufacturing operations to create carpet underlay. This scrap by-product is re-bonded to form rebond carpet underlay, which accounts for approximately 90% of the revenue of the business unit. The Debtors' carpet cushion products are sold through various wholesalers, "big box" home centers, retail buying groups and chains, and independent retailers and contractors. Capital Structure According to Mr. Christian, the Debtors have three primary layers of secured debt consisting of: -- a $190 million bank revolving credit facility and a $33 million term loan A facility, -- a $80 million term loan B facility, and -- second-lien bond indebtedness ($300 million of 10-3/4% Senior Notes due April 1, 2009). In addition, as of the Petition Date, the Debtors had approximately $7 million of other secured debt, including, inter alia, two industrial revenue bonds with face amounts of $1 million and $6 million. The IRBs are secured by letters of credit and liens on the Debtors' property that was developed with the proceeds of the IRBs. The Debtors also have outstanding two tranches of subordinated bonds -- $150 million of 9-7/8% Senior Subordinated Notes due June 15, 2007, and $98 million of 13-1/2% Senior Subordinated Notes that matured on August 15, 2005. They also have approximately $90 million in ordinary course trade debt that was unpaid as of the Petition Date. For the quarter ended July 3, 2005, Foamex International had 50,000,000 shares of common stock authorized for issuance of which 24,509,728 shares were outstanding, with an additional 3,489,000 shares issued and held in treasury. Road to Bankruptcy Mr. Christian relates that the Debtors have experienced a steady and dramatic decline in their operating performance since 2001. Specifically, the Debtors' gross profit margin has declined by three percentage points from 14.2% in 2001 to 11.2% in 2004. "The Debtors' overleveraged balance sheet has significantly contributed to this decline," Mr. Christian says. He identified a couple of factors that also contributed to the deterioration of the Debtors' operating performance: -- significant price increase of the Debtors' primary raw materials; and -- severe downturn in the U.S. automotive industry. Mr. Christian notes that the Debtors' bank and bond indebtedness -- totaling more than $740 million in principal amount -- has significantly impaired the Debtors' operating performance in several key respects: (a) The Debtors' need to service their heavy debt has limited their ability to make much needed capital investments and improvements. The lack of capital investment, in turn, has hampered the Debtors' ability to remain cost- competitive. (b) The Debtors' financial condition made their customers jittery. A few of the Debtors' significant customers have taken steps to source a portion of their business elsewhere or suspend placing new orders with the Debtors. (c) The prices of the chemicals that comprise the vast majority of the Debtors' raw material requirements have dramatically increased. The Debtors have been unable to pass along all those increases on to their customers. (d) The problems facing the North American automotive industry have greatly impacted the Debtors' automotive business, which is their second largest revenue source. Many OEMs are facing their own financial difficulties. These issues, when combined with the Debtors' own financial issues, have contributed to a reduction in net sales in the Debtors' automotive products segment from approximately $447 million in 2003 to approximately $351 million in 2004. Prior to the Petition Date, the Debtors initiated steps to rationalize their business by refocusing on their core competencies. Mr. Christian relates that in 2002 and 2003, the Debtors attempted to sell their carpet cushion and automotive businesses. But prices offered weren't right for the Debtors. In April 2005, the Debtors sold their rubber and felt carpet cushion business to Leggett & Platt, Incorporated for $38.5 million. In May 2005, the Debtors combined the management of their technical and foam products business units to increase productivity and efficiency, enhance their market focus and improve integration and communication among their sales, marketing and manufacturing teams. For the past two years, the Debtors have ceased operating in over 10 locations, closed four offices, reduced SG&A spending by over $25 million and implemented various strategies designed to reduce overhead expenses. A lot of work still needs to be done, Mr. Christian points out. The Debtors retained Miller Buckfire & Co., LLC, as their investment banker and financial advisor, to evaluate strategic alternative designed to strengthen the Debtors' balance sheet. Together, they devised various restructuring alternatives that could be implemented. According to Mr. Christian, as part of this process, Miller Buckfire solicited various financing and restructuring proposals from the Debtors' existing stakeholders as well as from third- party financing sources and equity sponsors. "The results of this process demonstrated that, to provide the Debtors with sufficient liquidity to operate effectively for the long-term, any restructuring would require a significant conversion of the Debtors' debt into equity -- something that, under the circumstances, could only be achieved by means of a chapter 11 case," Mr. Christian says. On August 15, 2005, Foamex L.P. did not make the $1.6 million payment due upon maturity of the 13-1/2% Subordinated Notes. At the same time, the Debtors announced amendments to their Bank Facility and Terms Loans to provide for waivers in respect of the payment default as well as certain covenant defaults. They also announced that agents under the loans had committed to provide them with debtor-in-possession and exit financing. Mr. Christian relates that the Debtors and their professionals have continued to negotiate with their key creditors concerning the terms of a consensual restructuring. "Those negotiations have culminated in the Debtors' agreement in principle with members of the ad hoc committee holding a majority in principal amount of the outstanding 10-3/4% Senior Notes on the key terms of the Debtors' reorganization." ----------------------------------------------------------------- [00002] FOAMEX INTERNATIONAL'S BALANCE SHEET AT JULY 3, 2005 ----------------------------------------------------------------- FOAMEX INTERNATIONAL INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) As of July 3, 2005 ASSETS CURRENT ASSETS Cash and cash equivalents $5,086,000 Accounts receivable, net of allowances of $9,789 and $9,001 199,318,000 Inventories 101,757,000 Other current assets 19,570,000 Debt issuance costs classified as current 18,879,000 ------------ Total current assets 344,610,000 ------------ Property, plant and equipment 394,427,000 Less accumulated depreciation (269,240,000) ------------ NET PROPERTY, PLANT AND EQUIPMENT 125,187,000 GOODWILL 107,104,000 DEBT ISSUANCE COSTS, net of accumulated amortization of $17,477 - DEFERRED INCOME TAXES 520,000 SOFTWARE COSTS, net of accumulated amortization of $6,453 and $6,401 8,731,000 INVESTMENT IN AND ADVANCES TO AFFILIATES 17,176,000 OTHER ASSETS 17,498,000 ------------ TOTAL ASSETS $620,826,000 ============ LIABILITIES AND STOCKHOLDERS' DEFICIENCY CURRENT LIABILITIES Revolving credit borrowings $115,192,000 Current portion of long-term debt 66,745,000 Long-term debt classified as current 562,799,000 Accounts payable 112,308,000 Accrued employee compensation and benefits 24,873,000 Accrued interest 12,015,000 Accrued customer rebates 12,302,000 Cash overdrafts 13,152,000 Other accrued liabilities 19,243,000 ------------ Total current liabilities 938,629,000 LONG-TERM DEBT 21,000 ACCRUED EMPLOYEE BENEFITS 56,050,000 OTHER LIABILITIES 9,834,000 ------------ Total liabilities 1,004,534,000 ------------ COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' DEFICIENCY Preferred Stock, par value $1.00 per share: Authorized 5,000,000 shares Issued 15,000 shares - Series B 15,000 Common Stock, par value $.01 per share: Authorized 50,000,000 shares Issued 27,998,728 shares and 27,949,762 shares 280,000 Additional paid-in capital 102,538,000 Accumulated deficit (414,185,000) Accumulated other comprehensive loss (35,355,000) Common stock held in treasury, at cost: 3,489,000 shares (27,780,000) Shareholder note receivable (9,221,000) ------------ Total stockholders' deficiency (383,708,000) ------------ TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $620,826,000 ============ ----------------------------------------------------------------- [00003] COMPANY'S PRESS RELEASE ANNOUNCING CHAPTER 11 FILING ----------------------------------------------------------------- Foamex Files for Chapter 11 to Implement Restructuring Company and Senior Debt Holders Agree in Principle on Key Terms of Reorganization Plan Company Seeks $240 Million Revolving Credit Debtor-in-Possession Financing Expects Operations to Continue in Normal Course LINWOOD, Pennsylvania -- September 19, 2005 -- Foamex International Inc. (NASDAQ: FMXI) today announced that the Company and certain of its subsidiaries have filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware. The Company, which has been in active negotiations with its key creditors, also announced an agreement in principle with certain members of an ad hoc committee that collectively hold a majority of the Company's Senior Secured Notes on the key terms of a proposed reorganization plan. The agreement in principle would provide for a significant deleveraging of the Company's balance sheet and result in improvements to the Company's capital structure and profitability. Today's filings do not affect the Company's foreign operations. In conjunction with its filing, the Company is seeking Bankruptcy Court approval of up to $240 million in revolving credit debtor-in-possession (DIP) financing agented by Bank of America, N.A. The proposed DIP financing, combined with the Company's cash flow from operations, is expected to provide the Company with sufficient liquidity to meet its post-petition operating expenses in the ordinary course of its business. With such funding sources the Company will be in a position to pay certain pre-petition obligations, including those owing to certain critical suppliers and employees, subject to Bankruptcy Court approval. Foamex has also received a commitment from Bank of America for exit financing upon the Company's emergence from chapter 11. Foamex will use chapter 11 to implement its restructuring initiatives, which are designed to restore the Company to long- term financial health, while continuing to operate in the normal course of business. Foamex will seek to emerge expeditiously from chapter 11, and it anticipates that its day-to-day operations will continue as usual without interruption during the chapter 11 process. Pursuant to the agreement in principle reached with certain members of the ad hoc committee, the Company would eliminate approximately $523 million of outstanding bond indebtedness which, in turn, would result in annual interest savings of $54 million. Specifically, holders of the Company's Senior Secured Notes would convert their debt into 100% of the equity of the reorganized Company, subject to dilution. If unsecured creditors (to the extent their claims are not otherwise treated as critical supplier claims or paid through assumption of their contracts during the case) and the holders of Foamex's Senior Subordinated Notes vote to accept the reorganization plan, then they will receive, on a pro rata basis, warrants to purchase between 5% and 10% of the equity of the reorganized Company, depending on the ultimate allowed amount of general unsecured claims. Under the agreement in principle, there would be no recovery for holders of equity interests in the Company. "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 Chief Executive Officer. "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." Chorman added, "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. We greatly appreciate the ongoing support of our long-term lenders, senior debt holders, customers, suppliers and employees. Their continued backing has been, and will continue to be, an integral factor in our success." In addition to seeking Bankruptcy Court approval of DIP financing, Foamex has filed a variety of typical "first day" motions in the Bankruptcy Court seeking authority to pay certain pre-petition amounts owed to its employees, critical suppliers, customers and others. These "first day" motions are intended to ensure that the Company transitions seamlessly into chapter 11 and that such key groups remain unaffected to the greatest extent possible by the chapter 11 filing. Foamex is being advised by its legal counsel, Paul, Weiss, Rifkind, Wharton and Garrison LLP, and Miller Buckfire & Co., LLC, its financial advisor. Houlihan, Lokey, Howard and Zukin and O'Melveny & Myers LLP are advising the ad hoc committee of Senior Secured Noteholders. More information about Foamex's reorganization case is available on the Company's Web site at http://www.foamex.com/restructuring About Foamex International Inc. Foamex, headquartered in Linwood, PA, is the world's leading producer of comfort cushioning for bedding, furniture, carpet cushion and automotive markets. The Company also manufactures high-performance polymers for diverse applications in the industrial, aerospace, defense, electronics and computer industries. For more information visit the Foamex Web site at http://www.foamex.com/ ----------------------------------------------------------------- [00004] FOAMEX INTERNATIONAL'S CHAPTER 11 DATABASE ----------------------------------------------------------------- Lead Debtor: Foamex International Inc. 1000 Columbia Avenue Linwood, Pennsylvania 19061 Bankruptcy Case No.: 05-12685 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- FMXI, Inc. 05-12686 Foamex L.P. 05-12687 Foamex Capital Corporation 05-12688 Foamex Carpet Cushion LLC 05-12689 Foamex Asia, Inc. 05-12690 Foamex Latin America, Inc. 05-12691 Foamex Mexico, Inc. 05-12692 Foamex Mexico II, Inc. 05-12693 Chapter 11 Petition Date: September 19, 2005 Court: District of Delaware Judge: Peter J. Walsh Debtors' Lead Counsel: Alan W. Kornberg, Esq. Paul, Weiss, Rifkind, Wharton & Garrison LLP 1285 Avenue of the Americas New York, New York 10019 Tel: 212-373-3209 Fax: 212-757-3990 Debtors' Local Counsel: Pauline K. Morgan, Esq. Young, Conaway, Stargatt & Taylor 1000 West Street, 17th Floor P.O. Box 391 Wilmington, Delaware 19899-0391 Tel: (302) 571-6600 Fax: (302) 571-1253 Debtors' Financial Advisor: Kenneth A. Buckfire Managing Director Miller Buckfire & Co., LLC 250 Park Avenue, 19th Floor New York, New York 10177 Tel: (212) 895-1800 Fax: (212) 895-1853 Debtors' Auditor & Accountant: KPMG LLP Debtors' Claims And Noticing Agent: Bankruptcy Services LLC 757 Third Avenue, 3rd Floor New York, New York 10017 Tel: (646) 282-2500 Fax: (646) 282-2501 U.S. Trustee: Kelly Beaudin Stapleton United States Trustee 833 Chestnut Street, Suite 500 Philadelphia, Pennsylvania 19107 Tel: 215-597-4411 Fax: 215-597-5795 Frederic J. Baker Senior Assistant U.S. Trustee 844 King Street, Suite 2207 Wilmington, Delaware 19801 Tel: 302-573-6491 Fax: 302-573-6497 ----------------------------------------------------------------- [00005] LIST OF FOAMEX'S 25 LARGEST UNSECURED CREDITORS ----------------------------------------------------------------- Entity Nature of Claim Claim Amount ------ --------------- ------------ U.S. Bank N.A. 10-3/4% Senior $300,000,000 Corporate Trust Services Secured Notes 100 Wall Street, Suite 1600 New York, NY 10005 Attn: James E. Murphy Vice President Fax: (212) 514-6841 The Bank of New York Senior $200,085,000 101 Barclay Street Subordinated 21st Floor West Notes (2 Tranches) New York, NY 10286 Fax: (212) 815-5915 Dow Chemical Trade Debt $20,513,344 2030 Dow Center Midland, MI 48674 Attn: Don Marquette Tel: (856) 802-9465 Fax: (989) 636-2705 Lyondell Chemical Worldwide Contract $16,620,973 1221 McKinney Street Houston, TX 77010 Attn: Larry Schubert Tel: (713) 309-4960 Fax: (713) 951-1602 Bayer Corporation Contract $14,047,029 100 Bayer Road Pittsburgh, PA 15205 Attn: Bob Kirk Tel: (412) 777-2560 Fax: (412) 777-7760 Shell Chemical Co. Contract $7,525,634 P.O. Box 2463 Houston, TX 77252-2463 Attn: Jean Claude Vandichel Tel: (713) 241-4965 Fax: (713) 241-3809 BASF Corporation Trade Debt $4,030,256 1609 Biddle Avenue Wyandotte, MI 48192 Attn: Larry Berkowski Tel: (734) 324-5485 Fax: (734) 324-5452 Huntsman Polyurethanes Contract $2,723,096 10003 Woodloch Forest Drive The Woodlands, TX 77380 Attn: Greg Geaman Tel: (281) 719-4822 Fax: (713) 235-6416 Milliken & Company Trade Debt $1,262,232 920 Milliken Road Spartanburg, SC 29303 Attn: Denis Golden Tel: (212) 819-4586 Fax: (212) 819-4279 American Express Travel Contract $1,200,000 Related Services Company, Inc. Travel Group Service Center 20022 North 31st Avenue Mail Code 080315 Phoenix, AZ 85027 Attn: Renee Celinski Tel: (609) 844-7770 Fax: (623) 492-1777 Kawashima Textile USA Inc. Trade Debt $1,061,233 412 Groves Street Lugoff, SC 29078 Attn: Cris Cowger Vice President Tel: (803) 421-0033 Fax: (803) 421-0039 EDS Corporation Contract $1,056,750 H1-5E-85 5400 Legacy Drive Plano, TX 75024 Attn: Dale Hoeshell Client Executive Tel: (972) 605-5103 Fax: (972) 605-6508 Mesilla Valley Transportation Contract $898,506 3530 West Picocho Los Cruces, NM 88001 Attn: Royal Jones Tel: (505) 541-4252 Fax: (505) 524-2835 Inolex Chemical Co. Contract $894,672 Jackson & Swanson Streets Philadelphia, PA 19148 Attn: Mike Chiarlone, Jr. Tel: (215) 271-0800 ext. 227 Fax: (215) 271-2621 Goldschmidt Chemical Corp. Trade Debt $714,928 914 East Randolph Road Hopewell, VA 23860 Attn: J.W. Witherspoon Market Manager Tel: (704) 544-0230 Fax: (704) 544-0240 Maverick Inc. Contract $663,328 5817 Tree Line Drive Madison, WI 53711 Attn: Chris Peterson Tel: (608) 227-0223 Fax: (608) 227-0224 Great Lakes Chemical Corp. Contract $531,680 P.O. Box 2200 West Lafayette, IN 47906 Attn: Vice President, Marketing Tel: (704) 894-0781 Fax: (704) 894-0162 Gulbrandsen Manufacturing Trade Debt $461,916 183 Gulbrandsen Road Orangeburg, SC 29116 Attn: Donald Gulbrandsen Tel: (908) 735-5458 ext. 108 Fax: (908) 735-6971 GE Silicones Trade Debt $441,155 318-24 Fourth Avenue South Charleston, WV 25303 Attn: David Simpson Account Executive Tel: (704) 545-7250 Fax: (704) 545-2475 Crowley Chemical Company Trade Debt $370,386 261 Madison Avenue, 14th Floor New York, NY 10016 Attn: Christopher Montensen Tel: (212) 682-1200 Fax: (212) 953-3487 Knight Transportation Contract $365,598 5601 West Buckeye Road Phoenix, AZ 85043 Attn: Keith Knight Tel: (602) 606-6457 Fax: (714) 685-6606 NBS Trucking Contract $353,997 P.O. Box 39 Custer City, PA 16725 Attn: Jim Rychik Tel: (814) 362-2076 Fax: (814) 362-6472 Advanced Foam Recycling Inc. Trade Debt $285,373 P.O. Box 822022 North Richland Hills, TX 76182 Tel: (817) 834-7662 Fax: (817) 834-2676 Albermarle Corporation Trade Debt $278,232 108 Interlachen Court Avondale, PA 19311 Tel: (610) 268-0232 Fax: (610) 268-3025 AM & Associates Trade Debt $252,096 602 North Cypress Street Orange, CA 92867-6604 Tel: (714) 744-1100 Fax: (714) 744-9865 ----------------------------------------------------------------- [00006] DEBTORS' MOTION TO OBTAIN $320,000,000 OF DIP FINANCING ----------------------------------------------------------------- Prior to the Petition Date, Foamex L.P. borrowed money under a number of credit agreements: Amount Outstanding Credit Facility at Petition Date --------------- ------------------ Revolving Credit and Term Loan Facility with Bank of America, N.A., as administrative agent: Revolving Loans $139,467,765 Term Loans $32,863,742 Undrawn Letters of Credit $21,656,223 Term Loan B Facility with Silver Point Finance, LLC, as administrative agent $80,000,000 To secure repayment of these obligations, the Debtors granted the Lenders priority liens on and security interests in substantially all of their assets, including all material real property, intellectual property, accounts receivable, inventory, investment property and equipment. The Debtors do not dispute the validity of those liens. Pursuant to an indenture, dated as of March 25, 2002, Foamex L.P. and Foamex Capital Corporation issued $300 million of 10-3/4% Senior Secured Notes due April 1, 2009, which are secured by junior liens on substantially all of the Prepetition Collateral. But the Notes are not guaranteed by Foamex Canada or secured by its assets. Without access to fresh financing, the Debtors won't have enough cash to continue operating under chapter 11 protection. Specifically, the Debtors will have difficulty paying their employees and suppliers and obtaining adequate trade terms, which would have a devastating effect on the Debtors' operations, customer base and revenues. "Thus, funds are urgently needed to meet all of the Debtors' working capital and other liquidity needs," Alan W. Kornberg, Esq., at Paul, Weiss, Rifkind, Wharton & Garrison, LLP, in New York says. The Debtors solicited postpetition financing proposals. After receiving a variety of proposals, the Debtors concluded that Bank of America's proposal provided the most favorable terms and the best pricing under the circumstances. BofA-Led DIP Facility Following intense negotiations, Bank of America, as administrative agent and as lender, agreed to make a debtor-in- possession financing facility available to Foamex L.P. Other lenders include: -- General Electric Capital Corporation -- JPMorgan Chase Bank, N.A. -- Congress Financial Corporation Central -- State of California Public Employees' Retirement System -- PNC Bank, National Association -- Wells Fargo Foothill, LLC The DIP Revolving Credit Lenders will make revolving loans and other extensions of credit available to Foamex L.P. up to a maximum outstanding principal amount of $240 million -- including a $40 million sub-limit for letters of credit. Once the Court approves the DIP Agreement, Foamex L.P. will repay the outstanding amounts under the Prepetition Bank Facility in full with a portion of the DIP Facility proceeds. All Prepetition Letters of Credit will be deemed to be letters of credit issued and outstanding under the DIP Revolving Credit Facility. The balance of the DIP Loan will be used for working capital and other general corporate purposes. Upon repayment of the Prepetition Bank Facility, Foamex L.P. expects that $30 million will remain available under the DIP Revolving Credit Facility, which it believes is sufficient to operate its businesses in Chapter 11. Subject to certain closing conditions, the DIP Revolving Credit Lenders have also agreed to convert amounts outstanding under the DIP Revolving Credit Agreement upon the Debtors' emergence from Chapter 11 into a revolving credit exit facility of up to $275 million -- including a $40 million sub-limit for letters of credit. Silver Point Roll-Up Facility Silver Point, as administrative agent and as lender, also agreed to make a debtor-in-possession financing facility available to Foamex L.P. Silver Point and other DIP Term Loan Lenders will repay the $80 million outstanding under the Prepetition Term Loan Facility using the proceeds of an $80 million DIP Term Loan Facility. All unpaid interest and fees under the Prepetition Term Loan Facility due at closing will be paid by the Debtors. Upon approval of the DIP Term Loan Facility, Silver Point has agreed to: -- return to the Debtors $1,025,000 in fees previously paid to it under the Prepetition Term Loan Facility, and -- waive any right they may have to default rate interest under the Prepetition Term Loan Facility. In addition, interest will accrue under the DIP Term Loan Facility at a substantially lower non-default rate than is currently provided for under the Prepetition Term Loan Facility. Upon the effectiveness of the Debtors' plan of reorganization, the DIP Term Loan Facility may be converted into an $80 million exit term loan financing facility. Silver Point has entered into a commitment letter with the Debtors to provide the Term Loan Exit Facility. The priority of all liens and claims between the postpetition lenders will be set forth in a Postpetition Intercreditor Agreement. Key Terms of DIP Facilities Borrower: Foamex L.P. DIP Guarantors: Foamex International, FMXI, Inc., Foamex Canada, and all domestic subsidiaries of Foamex L.P. DIP Agents: Bank of America, under the DIP Revolving Credit Facility, and Silver Point, under the DIP Term Loan Facility Scheduled Maturity Dates: At the earlier of: (a) 18 months after the closing date of the DIP Revolving Credit Facility, and (b) the effective date of the Debtors' Plan of Reorganization. Commitments: The DIP Term Loan Facility will not exceed the principal amount of $80,000,000. Revolving Credit commitments under the DIP Revolving Credit Facility will not exceed $240,000,000 in the aggregate, with a sub- limit for letters of credit not to exceed $40,000,000. Borrowings under the DIP Revolving Credit Facility will be limited by a borrowing base of: (a) 85% of eligible accounts receivable, plus (b) the lesser of: (x) 70% of the value of eligible inventory, and (y) 85% of the appraised net orderly liquidation value of eligible inventory, plus (c) the lesser of $50,000,000 or -- 85% of gross orderly liquidation value of eligible equipment, plus -- 50% of fair market value of eligible owned real estate, minus (d) reserves that Bank of America may establish in good faith. Availability under clause (c) will be reduced by $1,562,000 on the first business day of each fiscal quarter of the Borrower beginning with the Borrower's fiscal month January 2006. Use of Proceeds: Proceeds of borrowings under the DIP Revolving Credit Facility will be used to refinance prepetition amounts outstanding under the Prepetition Bank Facility and for working capital purposes. Prepetition Letters of Credit will be deemed to be letters of credit issued and outstanding under the DIP Revolving Credit Facility. Proceeds of the borrowings under the DIP Term Loan Facility will be used to refinance the principal amount outstanding under the Prepetition Term Loan Facility. Interest: Interest on the DIP Revolving Credit Facility will be payable monthly at a rate equal to, at the Borrower's election, the LIBOR Rate plus 250 basis points or the Base Rate plus 100 basis points. Upon approval of the DIP Term Loan Facility, interest will be payable monthly at a rate equal to 10% above the LIBOR Rate subject to a 0.75% add-on if trailing 12-month EBITDA is less than $58,000,000 beginning as of the fiscal quarter ending on January 1, 2006. Fees & Expenses: In addition to customary unused line fees, administrative agent fees and letter of credit fees as well as non-refundable prepetition commitment or closing fees paid in connection with the DIP Revolving Credit Facility, the Borrowing will be obligated to pay the DIP Revolving Credit Agent a $1,250,000 closing fee. There are no closing fees associated with the DIP Term Loan Facility. Rather, on the closing date of that facility, the DIP Term Loan Agent will return to the Borrower certain fees already paid totaling $1,025,000. The Borrower will also be obligated to pay the DIP Lenders and DIP Agents' customary fees and expenses. Prepayment Premium: Any prepayment or voluntary repayment of the DIP Term Loan Facility may be subject to a prepayment premium equal to 8%, but no prepayment premium will be payable [if] the DIP Term Loan Facility is refinanced through the proposed Term Loan Exit Facility. Security: All obligations to the DIP Agents and Lenders will be secured by first priority liens on the Postpetition Collateral (excluding avoidance actions), subject to the Carve-Out and certain other permitted liens. Carve-Out: $3,000,000 Financial Covenants: The Debtors will be required to maintain certain agreed upon levels of EBITDA to be tested on a monthly basis. The Debtors will have a limitation on its ability to incur capital expenditures. Conditions to Closing: [customary] Adequate Protection: The Indenture Trustee will be afforded adequate protection in the form of junior replacement liens on the Postpetition Collateral. The Debtors have agreed to pay the fees and expenses of legal counsel and financial advisor to the ad hoc committee of holders of 10-3/4% Senior Secured Notes as well as fees and expenses of legal counsel to the Indenture Trustee. Automatic Stay; Events of Default: Upon the occurrence and continuation of an Event of Default, the DIP Agent may terminate the commitments under the DIP Revolving Credit Facility, declare all Postpetition Obligations owing to be due and payable, and exercise rights and remedies under the relevant DIP Financing Documents, without regard to the automatic stay imposed by Section 362 of the Bankruptcy Code. Events of Default include the Borrower's failure to: -- pay any amount due under the DIP Financing Document, and -- observe any covenant or obligation in any of the DIP Financing Documents or the Financing Order. A full-text copy of the 107-page DIP Credit Agreement with Bank of America is available for free at: http://bankrupt.com/misc/FoamexDIPagreement.pdf Interim Approval At a hearing yesterday in Delaware, Judge Walsh allowed the Debtors to access up to $221 million of the $240 million DIP Revolving Credit Facility arranged by Bank of America and obtain a new $80 million DIP Term Loan from Silver Point. Bloomberg News reports that Trustee David Buchbinder objected to the Debtors' request because the DIP financing may cause "irreparable harm" by saddling Foamex with debt it can't repay. According to Dawn McCarty at Bloomberg, Judge Walsh believes that the DIP Agreement is the "best" for the Debtors even though it's not the standard postpetition financing facility. Judge Walsh will convene a final hearing next month to consider entry of a final DIP Financing Order and consider any objections that might be raised by any official committees appointed by the United States Trustee later this month. Bank of America is represented by Marc D. Rosenberg, Esq., at Kaye Scholer LLP, in New York. Silver Point is represented by James M. Peck, Esq., and Andrew R. Gottesman, Esq., at Schulte Roth & Zabel LLP, in New York. ----------------------------------------------------------------- [00007] S&P CUTS FOAMEX'S SR. SUBORDINATED NOTES RATINGS TO "D" ----------------------------------------------------------------- NEW YORK, New York -- September 19, 2005 -- Standard & Poor's Ratings Services said today that it lowered its senior secured and subordinated debt ratings on Foamex L.P./Foamex Capital Corp. to 'D' from 'C'. The downgrades follow Foamex's announcement that it has filed a voluntary pre-negotiated Chapter 11 bankruptcy plan. The ratings were also removed from CreditWatch with negative implications, where they were placed on July 11, 2005, on concerns that Foamex's leveraged financial profile and liquidity would continue to deteriorate. The corporate credit rating was lowered to 'D' on Aug. 15, 2005, following the company's failure to make a $51.6 million principal payment on its 13.5% subordinated notes that matured Aug. 15, 2005. "Operating results at Foamex have been hurt by elevated raw- material costs and an inability to pass through cost increases in a timely fashion," said Standard & Poor's credit analyst George Williams. With annual sales approaching $1.3 billion, Linwood, Pa.- based Foamex is the leading domestic producer of auto trim foam, carpet cushion, and foam for furniture and bedding applications. Foamex also maintains a niche technical foams business that offers more attractive margins and growth opportunities due to higher-value-added applications and technological innovation. ----------------------------------------------------------------- [00008] FOAMEX RECEIVES COURT APPROVAL OF FIRST DAY MOTIONS ----------------------------------------------------------------- Interim Approval Granted For New Credit Facilities Led By Bank of America and Silver Point Finance LLC Court Authorizes Payment of Employee Wages & Benefits, Payment to Vendors for Critical Post-Petition Goods and Services, and Other Actions to Allow Foamex's Business to Operate as Usual LINWOOD, Pennsylvania -- September 20, 2005 -- Foamex International Inc. (NASDAQ:FMXI) announced today that it received approval from the U.S. Bankruptcy Court for the District of Delaware for the Company's "first day" motions that will enable the Company's operations to proceed smoothly and without interruption throughout its reorganization case. Included among the 12 motions approved by the Court are those which permit Foamex to continue to pay in the ordinary course employee salaries, wages, and benefits, amounts owing in connection with the Company's workers' compensation and other insurance policies, and certain other pre-bankruptcy amounts; utilize its existing cash management systems; continue its customer programs uninterrupted; pay vendors for certain critical goods and services provided prior to the Chapter 11 case; access, on an interim basis, up to $221 million of the $240 million debtor-in-possession (DIP) financing arranged for the Company by Bank of America N.A. and obtain a new $80 million debtor in possession term loan from Silver Point Finance, LLC the proceeds of which will be used to repay a pre-petition term loan owed to that lender. Tom Chorman, Foamex's President and Chief Executive Officer, stated, "The court's approval of our first day motions will ensure that Foamex can conduct business as usual and remain focused on serving our customers as we go through this restructuring process. I am pleased that this process is beginning as smoothly as we expected, and I am very optimistic that we will continue to make solid progress." Foamex's case has been assigned number 05-12685 (PJW) before the Honorable Peter J. Walsh. More information about Foamex's reorganization case is available on the Company's Web site at http://www.foamex.com/restructuring About Foamex International Inc. Foamex, headquartered in Linwood, PA, is the world's leading producer of comfort cushioning for bedding, furniture, carpet cushion and automotive markets. The Company also manufactures high-performance polymers for diverse applications in the industrial, aerospace, defense, electronics and computer industries. For more information visit the Foamex web site at http://www.foamex.com/ *** End of Issue No. 1 ***