Union Subcontractors Files for Chapter 11

Union Subcontractors Inc., an Edina, Minn.-based installer of residential and commercial products, has filed for Chapter 11 Bankruptcy protection. In a statement, the company said that it has agreed on a debt-for-100% equity swap with its lenders. Such a deal would wipe out Wind Point Partners, which bought Union Subcontractors in 2004.

PRESS RELEASE

United Subcontractors, Inc. (“USI” or “The Company”), a privately held company and a leader in the installation of a wide range of residential and commercial products, announced that it has reached an agreement in principle with holders of the Company’s first-lien loan due in 2012 and holders of the Company’s second-lien loans due in 2013 on the terms of a financial restructuring to reduce the Company’s funded indebtedness by $314 million, via a conversion of the bulk of that debt to 100% of the equity in the Company upon the effective date of the reorganization plan.
In order to implement the financial restructuring, USI today elected to file Chapter 11 petitions in the United States Bankruptcy Court for the District of Delaware (the “Court”). The Company and its lenders have developed the terms for a pre-arranged plan of reorganization, which USI expects to file shortly. Under the terms of the plan of reorganization, all letters of credit will remain in place during and after the bankruptcy. The Company believes the filing will have little impact on its operations and it will look to maintain “business as usual” during the restructuring process. USI expects to emerge from Chapter 11 in the early summer.
The Company’s cash on hand, together with the cash generated from ongoing operations, will be sufficient to fund its normal business obligations through the financial restructuring under the terms of a consensual cash collateral agreement with the lenders.
Once completed and approved by the Court, the financial restructuring will de-leverage the Company’s balance sheet by approximately $314 million, leaving the Company with a healthy balance sheet and total debt of approximately $22.5 million.
“We are very pleased to have reached an agreement with our lenders that will enable us to emerge from Chapter 11 with, in essence, a debt free balance sheet,” said Paul Lustig, Chief Executive Officer, USI. “This agreement is significant for our customers, suppliers and employees as we believe it underscores our lenders’ confidence in our ability to position ourselves for continued profitable growth. On an operational level, we have a strong foundation in place with a cash position that is more than sufficient to run our business during this period. Our branch network has a solid reputation and represents the best in their area of expertise by delivering exceptional quality and reliability in the local markets they serve. Thanks to this operational strength and in light of the progress we have made with our lenders, we have concluded that a court-supervised process will accelerate – and finalize – our financial restructuring while helping to ensure that current business operations continue. Through this process, we will improve our capital structure and align it with the size of our current business operations, thereby helping us to do what we do best – serve our customers.”
USI has also filed a variety of customary motions to support its employees and suppliers during the restructuring process. As part of these motions, the Company has asked the Court for additional authorizations, including permission to continue paying employee wages and salaries and to provide employee benefits without interruption. In addition, the Company has filed a motion with the Court requesting permission to pay pre-petition and post-petition trade creditors.
USI has retained Alvarez & Marsal as financial and restructuring advisor and Proskauer Rose LLP as legal counsel to provide professional services in connection with these restructuring efforts.
Additional information is available at the Company’s website www.unitedsub.com. For access to Court documents and other general information about the Chapter 11 cases, please visit www.kccllc.net/USI.

About United Subcontractors Inc.
USI is a privately owned company with approximately 40 branches and 1,600 employees across the country. Founded in 1998 and based in Edina, Minnesota, United Subcontractors, Inc. is a market leader in the installation of a wide range of residential and commercial products within the construction industry.