ST. LOUIS, June 22 -- Falcon Products, Inc., a leading manufacturer of
commercial furniture for the hospitality, healthcare and food service
industries, today announced that it has prepared a joint Plan of Reorganization
(POR) that it intends to file with the U.S. Bankruptcy Court for the Eastern
District of Missouri, Eastern Division. Funds and accounts managed by Oaktree
Capital Management, LLC, and Whippoorwill Associates, Inc. will be co-proponents
of the POR. The POR has been filed as an exhibit to the motion to extend the
time to file the disclosure statement which would accompany the POR. The
Bankruptcy Court has ruled that the official filing of the POR should await the
filing of the disclosure statement. The Company currently expects to file a
disclosure statement no later than August 1, 2005.
The Company also announced the departure of Franklin A. Jacobs who has resigned
and will be retiring from his positions as Falcon's chairman, president and
chief executive officer. Falcon's Board of Directors has elected John S. Sumner,
Jr., who was named chief restructuring officer in March, as acting president and
chief executive officer.
Commenting on the POR, Jacobs, who founded Falcon 49 years ago, said, "Filing
the Plan of Reorganization represents a critical milestone in our efforts to
restructure Falcon, maintain its leadership in the commercial furniture industry
and return the business to profitability and growth. Over the past six months
I've worked with members of the management team, and more recently with John
Sumner, to develop a comprehensive business plan that we believe will enable
Falcon to provide superior value and satisfaction to our customers. I am
confident that John Sumner and the other members of the management team will
successfully implement our business plan which will put Falcon on the right path
towards a very bright future."
Jordon Kruse of Oaktree Capital Management, LLC, who along with Whippoorwill
Associates are co-proponents of the POR, said, "Frank Jacobs has been a dominant
presence in the commercial furniture industry for over 40 years and the driving
force behind Falcon. Frank's extraordinary vision and passion for the business
were key factors in the development of the business plan that we believe will
enable Falcon to reach new heights."
The Company's POR provides for a comprehensive reorganization and debt
recapitalization. Under the terms of the POR, debt will be reduced from over
$250 million to less than $90 million, thereby significantly lowering the
Company's cash interest requirements and allowing more operating cash flow to be
utilized in the business. The POR envisions a significant conversion of debt to
equity and an infusion of new capital via a rights offering that will be
backstopped by the co-proponents, Oaktree Capital Management, LLC and
Whippoorwill Associates. The POR does not provide for any distributions to
unsecured creditors (including trade creditors and holders of the 11 3/8% Senior
Subordinated Notes), the junior convertible notes or current equity holders;
however, certain unsecured creditors who qualify under Federal Securities Laws
will be able to participate in the rights offering. The POR proponents believe
this change from the terms outlined in the non-binding term sheet executed in
January 2005 is necessary for the confirmation of a viable plan of
reorganization which is based on the comprehensive business plan recently
developed by the Company. Upon consummation of the POR, the majority of Falcon's
equity will be held by Oaktree and Whippoorwill and the Company will no longer
be a public reporting entity.
"We are excited about the plan and believe our investment will provide the
Company with the flexibility it needs to execute its business plan," said
Shelley Greenhaus, president of Whippoorwill Associates. "We are optimistic
about Falcon's business prospects and look forward to our long term involvement
with Falcon and its employees."
Confirmation and consummation of Falcon's POR is subject to a number of
conditions including approval by certain creditors of the Company and approval
by the Bankruptcy Court. Falcon will solicit acceptance of the plan following
approval of its disclosure statement by the Bankruptcy Court. A hearing on the
confirmation of the Plan is expected to take place in October 2005. There can be
no assurance, however, that the POR as filed will be adopted and approved.
The Company also announced that a final report relating to the previously
announced Audit Committee investigation has been issued. Based on the report,
the Audit Committee has concluded that the Company's financial statements for
periods dating back to the fiscal year ended October 31, 2003 have been
materially misstated. Accordingly, the Company's financial statements for FY
2003 and the first three quarters of FY 2004 should not be relied upon. The
Company intends to file a Form 8-K relating to the non-reliance on previously
issued financial statements.
On January 4, 2005 the Company announced that it expected to record a
significant charge relating to the write-down of inventory during the fourth
quarter of FY 2004 and that it believed it was likely that the inventory
write-down would impact prior periods. During the course of the FY 2004 yearend
financial statement audit, the Company identified additional adjustments that it
believed could impact prior periods. The estimated amount of such adjustments
will be disclosed in the Form 8-K. As a result of the Company's current
financial and internal resource constraints, it has not been able to quantify
the impact of the inventory write-down and other adjustments on prior periods.
As such the Company is currently unable to restate prior period financial
statements.
Falcon Products, Inc. is the leader in the commercial furniture markets it
serves, with well-known brands, the largest manufacturing base and the largest
sales force. Falcon and its subsidiaries design, manufacture and market products
for the hospitality and lodging, food service, office, healthcare and education
segments of the commercial furniture market. Falcon, headquartered in St. Louis,
Missouri, currently operates eight manufacturing facilities throughout the world
and has more than 1,500 employees. Oaktree Capital Management, LLC is a Los
Angeles based private investment firm that manages more than $28 billion of
investments in select niche markets for institutions and wealthy individuals.
Founded in 1990, Whippoorwill Associates, Inc. is an investment manager
specializing in distressed investing on behalf of institutional clients.
This press release does not constitute an offering of securities which can only
be made through compliance with applicable securities laws.
Certain statements in this press release that are not historical facts may be
"forward looking statements." Actual events may differ materially from those
projected in any forward-looking statement. There are a number of important
factors involving risks and uncertainties beyond the control of the Company that
could cause actual events to differ materially from those expressed or implied
by such statements. Such factors include the Company's ability to obtain
approval of the requisite percentages of each creditor class, if any, whose
consent may be required for the approval of the POR, absence of any material
adverse change in the business of the Company, the Company's ability to comply
with the terms of its debtor-in-possession facility and the Company's ability to
grow its business and take advantage of opportunities within the markets it
serves. The Company disclaims any intention or obligation to update publicly or
revise such statements, whether as a result of new information, future events or
otherwise.
