Panolam Industries Plans Bankruptcy and Debt Restructure

Panolam Industries, a Shelton, Conn.-based decorative laminate company, said that it has reached a debt restructuring agreement with lenders led by Apollo Capital Management. The deal would include a prepackaged debt-for-equity swap. Genstar Capital and Sterling Group bought Panolam for $345 million in 2005.

PRESS RELEASE

Panolam Industries International, Inc. (the “Company”) today announced that it has reached an agreement in principle with noteholders holding two-thirds in principal amount of the Company’s outstanding senior subordinated notes, led by Apollo Capital Management, to pursue a restructuring that will significantly reduce the Company’s outstanding debt. The contemplated transaction will put the Company in a stronger financial position for future growth and stability. A restructuring on the agreed terms would enable the Company to reduce the amount of net debt on its balance sheet by approximately $151 million (or approximately 50%), eliminate approximately $16 million in annual cash interest payments to the noteholders, and free up additional cash that can be reinvested in its business. In addition, it is contemplated that the Company’s senior lenders would receive full recovery on the face amount of their claims.

The Company and the noteholders are now focusing on documenting the contemplated transaction and the processes for implementing the restructuring. Importantly, the Company continues to maintain a strong liquidity position and expects to meet its obligations to its suppliers, customers, and employees in the ordinary course of business during the restructuring process, without the need for any additional financing. Moreover, the proposed restructuring contemplates all pre-petition trade claims being paid in full in the ordinary course of business. The Company presently has approximately $46 million in cash. All day-to-day operations and business of the Company will continue as usual.

Jason Perri of Apollo said, “We are proud to have partnered with the Company in a consensual restructuring that will meaningfully reduce leverage and leave the business poised to take advantage of the market opportunities that will arise as we move toward a macroeconomic recovery. Management has done a fantastic job of guiding the Company through this process, and we look forward to working together with this top-notch leadership team in support of the business and its customers going forward”.

Mr. Robert J. Muller, Jr., Chairman and Chief Executive Officer of the Company, said, “This marks a significant step in our debt restructuring process. We are pleased to have the strong support of our noteholders and appreciate the continuing loyalty of our business partners, suppliers, customers, and employees as we move through this process from which we will emerge with a stronger balance sheet and be better positioned to pursue future growth opportunities”.

The Company also announced that it will not make the excess cash flow or interest payments as outlined in the terms of its previously announced Forbearance Agreement with its senior lenders and that the Forbearance Agreement expired on June 30, 2009. The Company is continuing discussions with its senior lenders regarding possible restructuring alternatives.
Panolam Industries International, Inc. is a market leader and innovator in the decorative laminate industry. The Company’s products, which are marketed under the widely recognized Panolam®, Pionite®, Nevamar®, Pluswood® brand names, are used in a wide variety of residential and commercial indoor surfacing applications, including kitchen and bath cabinets, furniture, store fixtures, case goods, and other applications. We also market other decorative laminates including FRL, a fiber reinforced laminate product. In addition to decorative laminates, we manufacture and distribute industrial laminate products, including Conolite and Panolam FRP, a fiber reinforced product. We also produce and market a selection of specialty resins for industrial uses, such as powdered paint, adhesives and melamine resins for decorative laminate production, custom treated and chemically prepared decorative overlay papers for the high pressure laminates, or HPL and thermally-fused melamine, or TFM industry, and a variety of other industrial laminate products such as aircraft cargo liners and bowling lanes.