EXHIBIT 99.3
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
RICHMOND DIVISION
) Chapter 11 Cases
In re: )
) Case No. 01- 61119 (DHA)
AMF BOWLING WORLDWIDE, INC., et al., )
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)
Debtors. ) Jointly Administered
)
DISCLOSURE STATEMENT FOR
DEBTORS' JOINT PLAN OF REORGANIZATION
August 31, 2001
This is not a solicitation of acceptances or rejections of the Debtors'
Joint Plan of Reorganization under chapter 11 of the Bankruptcy Code, which is
annexed as Exhibit A to this Disclosure Statement (the "Plan"). Acceptances or
rejections with respect to the Plan may not be solicited until a disclosure
statement has been approved by the United States Bankruptcy Court for the
Eastern District of Virginia. This Disclosure Statement is being submitted for
approval, but has not yet been approved, by the Bankruptcy Court. Any such
approval by the Bankruptcy Court of this Disclosure Statement as containing
"adequate information" will not constitute endorsement of the Plan. Information
contained in this Disclosure Statement is subject to completion or amendment.
Willkie Farr & Gallagher McGuireWoods LLP
787 Seventh Avenue One James Center
New York, New York 10019-6099 901 East Cary Street
(212) 728-8000 Richmond, Virginia 23219
(804) 775-1000
Co-Counsel to the Debtors and Co-Counsel to the Debtors and
Debtors in Possession Debtors in Possession
The deadline by which each holder of an Impaired Claim must cast a properly
completed and delivered ballot for its vote to accept or reject the Plan to
be counted is _____ __, 2001, at __:00 __.m. (Eastern time), unless
extended.
IMPORTANT NOTICE
This Disclosure Statement and its related documents are the
only documents authorized by the Bankruptcy Court to be used in connection with
the solicitation of votes to accept the Plan. No representations have been
authorized by the Bankruptcy Court concerning the Debtors, their business
operations or the value of their assets, except as explicitly set forth in this
Disclosure Statement.
Please refer to the Glossary and the Plan (or, where
indicated, certain other motions filed with the Bankruptcy Court) for
definitions of the capitalized terms used in this Disclosure Statement.
The Debtors reserve the right to file an amended Plan and
Disclosure Statement from time to time. The Debtors urge you to read this
Disclosure Statement carefully for a discussion of voting instructions, recovery
information, classification of claims, the history of the Debtors and the
Reorganization Cases, the Debtors' businesses, properties and results of
operations, historical and projected financial results and a summary and
analysis of the Plan.
The Plan and this Disclosure Statement have not been required
to be prepared in accordance with federal or state securities laws or other
applicable nonbankruptcy law. None of the Securities and Exchange Commission,
any state securities commission or similar public, governmental or regulatory
authority has approved this Disclosure Statement, the Plan or the securities
offered under the Plan, or has passed on the accuracy or adequacy of the
statements in this Disclosure Statement. Any representation to the contrary is a
criminal offense. Persons trading in or otherwise purchasing, selling or
transferring securities of the Debtors should evaluate the Plan in light of the
purposes for which it was prepared.
This Disclosure Statement contains only a summary of the Plan.
This Disclosure Statement is not intended to replace the careful and detailed
review and analysis of the Plan, only to aid and supplement such review. This
Disclosure Statement is qualified in its entirety by reference to the Plan, the
Plan Supplement and the exhibits attached thereto and the agreements and
documents described therein. If there is a conflict between the Plan and this
Disclosure Statement, the provisions of the Plan will govern. All holders of
Claims and Equity Interests are encouraged to review the full text of the Plan
and Plan Supplement and to read carefully the entire Disclosure Statement,
including all exhibits, before deciding how to vote with respect to the Plan.
Except as otherwise indicated, the statements in this
Disclosure Statement are made as of August 31, 2001 and the delivery of this
Disclosure Statement will not, under any circumstances, imply that the
information contained in this Disclosure Statement is correct at any time after
August 31, 2001. Any estimates of claims or interests in this Disclosure
Statement may vary from the final amounts of claims or interests allowed by the
Bankruptcy Court.
Holders of Claims and Equity Interests should not construe
this Disclosure Statement as providing any legal, business, financial or tax
advice. Each holder should, therefore, consult with its own legal, business,
financial and tax advisors as to any such matters in connection with the Plan,
the solicitation of votes on the Plan and the transactions contemplated by the
Plan.
As to contested matters, adversary proceedings and other
actions or threatened actions, this Disclosure Statement is not, and is in no
event to be construed as, an admission or stipulation. Instead, this Disclosure
Statement is, and is for all purposes to be construed as, solely and exclusively
a statement made in settlement negotiations. The settlements and compromises
described in the Plan and this Disclosure Statement remain subject to ongoing
negotiations with the respective parties.
TABLE OF CONTENTS
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GLOSSARY 1
I. SUMMARY OF DISCLOSURE STATEMENT..........................................................................8
A. Purpose of this Disclosure Statement..............................................................8
B. Background of Reorganization Cases...............................................................10
C. Voting...........................................................................................10
D. Effects of Exit Financing on Distributions Under the Plan........................................14
E. Summary of Distributions to Be Made Under the Plan...............................................15
1. Summary of Classification and Treatment of Claims.........................................16
2. Summary of Distributions Under the Plan...................................................19
F. Confirmation Hearing.............................................................................28
G. Claims Represented by Book-Entry Positions with The Depository Trust Company-- Senior
Subordinated Note Claims.........................................................................30
H. Cancellation of Existing Securities and Agreements...............................................30
II. PRINCIPAL CHARACTERISTICS OF NEW AMF COMMON STOCK, NEW WARRANTS AND NEW AMF NOTES.......................31
A. New AMF Notes....................................................................................31
B. New AMF Common Stock.............................................................................32
C. New Warrants.....................................................................................33
D. Registration Rights Agreement....................................................................34
E. Summary of Reorganized AMF Amended and Restated Certificate of Incorporation and By-Laws.........35
III. IMPLEMENTATION OF THE PLAN..............................................................................36
A. New Securities and Exit Facility.................................................................36
B. Exit Facility....................................................................................36
1. Third Party Facility......................................................................36
2. Senior Lender Facility....................................................................37
C. Termination and Discharge of All Existing Debts, Claims and Equity Interests.....................37
D. Deemed Consolidation of Debtors..................................................................38
E. Corporate Organization of Reorganized AMF and Reorganized Debtors................................40
F. Market and Trading Information...................................................................42
G. Dividends........................................................................................42
H. Applicability of Federal and Other Securities Laws...............................................42
1. Initial Offer and Sale of Securities......................................................42
2. Subsequent Transfers Under Federal Securities Laws........................................43
3. Subsequent Transfers Under State Law......................................................45
I. Certain Transactions by Stockbrokers.............................................................45
J. Fractional Shares--Distribution of New AMF Common Stock and New Warrants.........................46
K. Treatment of Claims and Equity Interests.........................................................46
1. Generally.................................................................................46
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2. Setoffs...................................................................................46
L. Conditions to Confirmation and Consummation......................................................46
M. Treatment of Officers and Directors..............................................................47
N. Employee Incentive Program.......................................................................48
O. Release of Claims Against Representatives Under the Plan.........................................49
P. No Recourse With Respect to Disputed Claims......................................................49
Q. Injunction.......................................................................................49
R. Release of Liens.................................................................................50
S. Discharge of Debtors.............................................................................51
T. Treatment of Executory Contracts and Unexpired Leases............................................51
1. General Treatment.........................................................................51
2. Cure of Defaults..........................................................................52
3. Rejection Claims..........................................................................52
4. Employment Agreement for the Chief Executive Officer of Reorganized AMF...................52
U. Exculpation......................................................................................52
IV. RISK FACTORS............................................................................................53
V. CONFIRMATION OF THE PLAN................................................................................60
A. Confirmation Generally...........................................................................60
B. Voting Procedures and Standards..................................................................60
C. Acceptance.......................................................................................61
D. Confirmation and Consummation....................................................................61
1. Best Interests of Holders of Claims and Interests.........................................63
2. Financial Feasibility.....................................................................63
3. Cram Down.................................................................................64
4. Classification of Claims and Interests....................................................65
VI. CERTAIN EFFECTS OF THE PLAN.............................................................................65
A. Reorganized AMF..................................................................................65
B. Financial Projections and Valuation Analysis.....................................................67
C. The Role of the Creditors' Committee.............................................................69
D. Post-Confirmation Jurisdiction of the Bankruptcy Court...........................................69
VII. HISTORICAL INFORMATION..................................................................................71
A. Business and Significant Recent Events...........................................................71
B. Events Leading to Chapter 11 and the Need to Reorganize..........................................73
C. Relationship Between BINC and WINC...............................................................75
VIII. THE CASES...............................................................................................75
A. Continuation of Business After the Commencement Date.............................................75
1. Board of Directors........................................................................75
2. Management................................................................................76
3. Stabilizing Operations....................................................................77
4. First Day Motions.........................................................................77
5. Retention and Severance Programs..........................................................81
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6. Senior Executive Employment Agreements....................................................82
7. Cash Management Motion....................................................................83
B. Case Administration..............................................................................83
1. Bar Date..................................................................................83
2. Exclusivity...............................................................................84
3. Schedules and Statement of Financial Affairs..............................................84
4. Information and Estimates.................................................................84
5. Preferences and Fraudulent Conveyances....................................................85
6. Representation of the Debtor..............................................................86
7. Representation of Other Parties in Interest...............................................86
IX. CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES............................................................86
A. Tax Consequences to Creditors....................................................................87
1. General...................................................................................87
2. Treatment of Certain Creditors............................................................89
B. Tax Consequences to Equity Holders...............................................................90
C. Tax Consequences to the Debtors..................................................................90
1. Cancellation of Debt......................................................................90
2. Effects on Net Operating Loss Carryforwards and Other Tax Attributes......................91
X. PROCEDURES FOR DISTRIBUTIONS UNDER THE PLAN.............................................................92
A. Distribution Record Date.........................................................................92
B. Disbursing Agent.................................................................................92
C. Date of Distributions............................................................................92
D. Distributions to Classes 2, 4 and 6..............................................................92
E. Distribution to Class 5..........................................................................93
F. Surrender of Instruments.........................................................................93
G. Unclaimed Distributions..........................................................................93
H. Treatment of Disputed, Contingent and Unliquidated Claims........................................94
1. Characterization of Disputed Claims.......................................................94
2. Resolution of Contested Claims............................................................94
XI. ADDITIONAL INFORMATION..................................................................................94
XII. CONCLUSION..............................................................................................95
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INDEX OF EXHIBITS
EXHIBIT A Plan of Reorganization
EXHIBIT B Non-Debtor Subsidiaries
EXHIBIT C Members of Creditors' Committee
EXHIBIT D Members of Senior Lender Steering Committee
EXHIBIT E Financial Projections
EXHIBIT F Liquidation Analysis
EXHIBIT G Reorganized Debtors
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GLOSSARY
The following terms are used in the Disclosure Statement and
the Plan. When used in this Disclosure Statement, these terms have the meanings
assigned to them in the table unless otherwise indicated. Please see the Plan
(or, where indicated, certain other motions filed with the Bankruptcy Court) for
the definitions of other capitalized terms used in this Disclosure Statement.
Administrative any right to payment constituting a cost or expense of administration of any of
Expense Claim the Reorganization Cases (other than a Fee Claim) allowed under sections 503(b)
and 507(a)(1) of the Bankruptcy Code, including, without limitation, any actual and
necessary costs and expenses of preserving one or more of the Debtors' Estates, any actual
and necessary costs and expenses of operating one or more of the Debtors' businesses, and
any fees or charges assessed against one or more of the Estates of the Debtors under
section 1930 of chapter 123 of title 28 of the United States Code.
Allowed with reference to any Claim (i) subject to Section 13.3 of the Plan, any Claim
against any Debtor which has been listed by such Debtor in the Schedules as
liquidated in amount and not disputed or contingent and for which no contrary or
inconsistent proof of claim has been filed; (ii) any timely filed Claim (a) as to
which no objection to allowance has been interposed prior to the deadline by which
such objections must be filed in accordance with section 7.1 of the Plan or such
other applicable period of limitation fixed by the Bankruptcy Code, the Bankruptcy
Rules, or the Bankruptcy Court and as to which such deadline has expired, or (b) as
to which an objection has been filed and not withdrawn and such objection has been
determined by a Final Order (but only to the extent such objection has been
overruled); (iii) any Claim which is not a Disputed Claim; or (iv) any Claim
allowed under the Plan. Unless otherwise specified herein or by order of the
Bankruptcy Court, Allowed Administrative Expense Claims and Allowed Claims will
not, for any purpose under the Plan, include interest on such Administrative
Expense Claims or Claims on or after the Commencement Date.
AMF Affiliate Claim any Claim (other than an Other Secured Claim) held by an AMF Affiliate against
a Debtor in respect of an intercompany loan, advance or transfer.
AMF Affiliates direct and indirect non-debtor subsidiaries of WINC that are incorporated in
jurisdictions other than states or commonwealths of the United States.
Bankruptcy Code title 11 of the United States Code, as amended from time to time, as applicable to the
Reorganization Cases.
Bankruptcy Court the United States Bankruptcy Court for the Eastern District of Virginia, Richmond
Division, or any other court exercising competent jurisdiction over the Reorganization
Cases or any proceeding therein.
BINC AMF Bowling, Inc.
Business Day any day other than a Saturday, a Sunday, or any other day on which banking institutions
in New York, New York are required or authorized to close by law or executive order.
Cash legal tender of the United States of America or a cash equivalent.
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Claim, claim means "claim", as defined in section 101(5) of the Bankruptcy Code. Under section
101(5), a "claim" is any:
o right to payment, whether or not such
right is reduced to judgment,
liquidated, unliquidated, fixed,
contingent, matured, unmatured,
disputed, undisputed, legal,
equitable, secured or unsecured; or
o right to an equitable remedy for
breach of performance if such breach
gives rise to a right to payment,
whether or not such right to an
equitable remedy is reduced to
judgment, fixed, contingent, matured,
unmatured, disputed, undisputed,
secured or unsecured.
Class any group of Claims or Equity Interests classified by the Plan as belonging to a single
particular class pursuant to section 1123(a)(1) of the Bankruptcy Code.
Class 4 Distribution the amount of New Warrants to be allocated for payment of Class 4 Claims, which amount
shall be determined by multiplying the Ratable Class 4 Portion by the number of New
Warrants.
Class 5 Distribution the amount of New Warrants to be allocated for payment of Class 5 Claims, which
amount shall be determined by multiplying the Ratable Class 5 Portion by the number
of New Warrants.
Class 6 Distribution the amount of New Warrants to be allocated for payment of Class 6 Claims, which
amount shall be determined by multiplying the Ratable Class 6 Portion by the number
of New Warrants.
Commencement Date July 2, 2001
Confirmation Date the date on which the Clerk of the Bankruptcy Court enters the Confirmation Order
on the docket.
Confirmation Order the order of the Bankruptcy Court confirming the Plan of Reorganization pursuant
to section 1129 of the Bankruptcy Code.
Consolidation Order an order of the Bankruptcy Court which may be the Confirmation Order, approving
the consolidation of the Estates for purposes of the Plan.
Creditors' Committee the statutory committee of unsecured creditors appointed in the
Reorganization Cases in accordance with section 1102 of the Bankruptcy Code, as the
same may be reconstituted from time to time.
Debtors AMF Bowling Worldwide, Inc., AMF Group Holdings Inc., AMF Bowling Holdings Inc.,
AMF Bowling Products, Inc., AMF Bowling Centers Holdings Inc., AMF Worldwide
Bowling Centers Holdings Inc., AMF Bowling Centers, Inc., AMF Beverage Company of
Oregon, Inc., AMF Beverage Company of W. Va., Inc., Bush River Corporation, King
Louie Lenexa, Inc., 300, Inc., American Recreation Centers, Inc., Michael Jordan
Golf Company, Inc., MJG - O'Hare, Inc., AMF Bowling Centers (Aust.) International
Inc., AMF Bowling Centers (Hong Kong) International Inc., AMF Bowling Centers
International Inc., AMF BCO-UK One, Inc., AMF BCO-UK Two, Inc., AMF BCO-France One,
Inc., AMF BCO-France Two, Inc., AMF Bowling Centers Spain Inc., AMF Bowling Mexico
Holding, Inc., and Boliches AMF, Inc.
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DIP Facility that certain Senior Secured Priming Debtor-In-Possession Credit Agreement, dated July
5, 2001, among WINC, certain guarantors, including Holdings, and Citibank, N.A., as
Administrative Agent, for a group of lenders, as may be amended from time to time.
DIP Refinancing Amount the amount of Cash necessary to pay all outstanding obligations under the DIP Facility
pursuant to section 2.5 of the Plan.
Disclosure Statement this Disclosure Statement that relates to the Plan of Reorganization, as such
Disclosure Statement may be amended, modified, or supplemented (including all exhibits
and schedules annexed hereto or referred to herein).
Disputed Claim any Claim that is not an Allowed Claim as of the relevant date.
Distribution Record Date the Confirmation Date or such other date as shall be established by the Bankruptcy
Court in the Confirmation Order.
EBITDA Earnings before interest, taxes, depreciation and amortization and restructuring and
refinancing charges.
Effective Date the first Business Day on or after the Confirmation Date specified by the Debtors on
which: (i) no stay of the Confirmation Order is in effect; and (ii) all conditions to
the effectiveness of the Plan specified in section 10.1 of the Plan have been satisfied
or waived.
Enterprise Value the enterprise value assumed for Reorganized AMF solely for purposes of implementing
the Plan.
Equity Interest the interest of any holder of an equity security of any of the Debtors, whether or not
represented by any issued and outstanding shares of common or preferred stock or other
instrument evidencing a present ownership interest in any of the Debtors, whether or
not transferable, or any option, warrant, or right, contractual or otherwise, to
acquire any such interest.
Estates the estates created in the Reorganization Cases in accordance with section 541 of
the Bankruptcy Code.
Estimation Order one or more orders of the Bankruptcy Court that (i) estimates the maximum dollar
amount of Allowed and Disputed Claims, inclusive of contingent and/or unliquidated
Claims in a particular Class, (ii) determines and fixes the Tort Claims Estimate,
and (iii) sets the amount of any particular Claim for final allowance purposes
pursuant to sections 105 and 502(c) of the Bankruptcy Code, including, without
limitation, the Confirmation Order to the extent that the Confirmation Order grants
the same relief that otherwise would have been granted in a separate Estimation
Order.
Exit Facility either (i) the Third Party Facility or (ii) the Senior Lender Facility, as set forth in
a notice filed with the Bankruptcy Court fifteen (15) Business Days before the date of
the Confirmation Hearing.
Fee Claim a Claim for compensation, indemnification or reimbursement of expenses pursuant to
sections 327, 328, 330, 331 or 503(b) of the Bankruptcy Code in connection with the
Reorganization Cases.
Final Order an order or judgment of the Bankruptcy Court entered by the Clerk of the Bankruptcy
Court on the docket in the Reorganization Cases, (i) which has not been reversed,
vacated, or stayed, and as to which the time to appeal, petition for certiorari or
move for a new trial, reargument, or rehearing has expired; or (ii) which, if an
appeal, writ of certiorari, new trial, reargument, or rehearing thereof has been
sought, (a) such order or judgment of the Bankruptcy Court shall not have been
stayed, or the stay has been terminated, or (b) such order or judgment, if stayed,
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shall have been affirmed by the highest court to which such order was appealed, or
certiorari shall have been denied, or a new trial, reargument, or rehearing shall
have been denied or resulted in no modification of such order, and the time to take
any further appeal, petition for certiorari or move for a new trial, reargument or
rehearing shall have expired; provided, however, that the filing of or the
possibility that a motion under Rule 60 of the Federal Rules of Civil Procedure, or
any analogous rule under the Federal Rules, may be filed relating to such order or
judgment shall not cause such order or judgment not to be a Final Order.
Holdings AMF Group Holdings Inc.
Interdebtor Claim any Claim held by a Debtor against another Debtor.
New AMF Common Stock the common stock of Reorganized AMF, par value $0.01 per share, to be authorized under
the Amended Certificate of Incorporation.
New AMF Notes the 13% Senior Subordinated Notes due 2008 having an aggregate principal amount
equal to one hundred fifty million dollars ($150,000,000), authorized and issued by
Reorganized AMF on the Effective Date, the terms of which shall be governed by the
New Senior Subordinated Note Indenture, which shall be in form and substance
reasonably satisfactory to the Senior Lender Steering Committee and substantially
in the form contained in the Plan Supplement.
New Management Options seven (7) year options to purchase up to twelve percent (12%) of the fully-diluted New
AMF Common Stock issued under the Plan as of the Effective Date but giving effect to
the shares that will be issued upon exercise of such options and upon exercise of the
New Warrants.
New Senior Subordinated that certain Indenture, dated as of the Effective Date, between Reorganized AMF and the
Note Indenture trustee thereunder, which shall be in form and substance reasonably satisfactory to the
Senior Lender Steering Committee and shall be substantially in the form contained in
the Plan Supplement, relating to and governing the issuance of the New AMF Notes.
New Warrant Agreement that certain Warrant Agreement, dated as of the Effective Date, which shall be in form
and substance reasonably satisfactory to the Senior Lender Steering Committee and shall
be substantially in the form contained in the Plan Supplement.
New Warrants those warrants, which shall be in form and substance reasonably satisfactory to the
Senior Lender Steering Committee and shall be substantially in the form contained
in the Plan Supplement, to purchase shares of the New AMF Common Stock, together
representing twelve percent (12%) of the fully-diluted shares of New AMF Common
Stock issued under the Plan as of the Effective Date but giving effect to the
shares that will be issued upon exercise of the New Warrants (without giving effect
to the exercise of the New Management Options).
Other Secured Claim any Secured Claim against any of the Debtors not constituting a Senior Lender Claim.
Plan the joint chapter 11 plan of reorganization to which this Disclosure Statement relates,
including, without limitation, the exhibits and schedules thereto, as the same may be
amended or modified from time to time in accordance with the provisions of the
Bankruptcy Code and the terms of the Plan.
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Plan Documents the documents (other than the Plan) to be executed, delivered, assumed, and/or
performed in conjunction with the consummation of the Plan on the Effective Date,
including, but not limited to, (i) the Amended Bylaws, (ii) the Amended Certificate
of Incorporation, (iii) the New Senior Subordinated Note Indenture, (iv) the
Registration Rights Agreement, (v) the New Warrant Agreement, (vi) the New
Employment Agreement; (vii) the form of New AMF Note; (viii) the Exit Facility; and
(ix) the New Management Incentive Plan.
Plan Securities Collectively, the New AMF Notes, the New Warrants, the New AMF Common Stock, and the
New AMF Common Stock issuable upon the exercise of the New Warrants.
Plan Supplement the supplemental appendix to the Plan filed at least [__] Business Days before the date
of the Confirmation Hearing that will contain the commitment letter for the Exit
Facility and the draft forms of the Plan Documents listed on schedule [__] of the Plan,
which Plan Documents will be entered into as of the Effective Date.
Priority Tax Claim any Claim of a governmental unit against one or more of the Debtors of the kind
entitled to priority in payment under section 507(a)(8) of the Bankruptcy Code.
Projections the projected financial information contained in this Disclosure Statement relating to
the Reorganized Debtors.
Reorganization Cases the jointly administered cases under chapter 11 of the Bankruptcy Code commenced by
the Debtors on July 2, 2001 in the Bankruptcy Court and styled In re: AMF Bowling
Worldwide, Inc., et al., 01-61119 (DHA).
Reorganized AMF AMF Bowling Worldwide, Inc., on or after the Effective Date.
Reorganized Company the Reorganized Debtors and each of their non-Debtor subsidiaries.
Reorganized Debtors each of the Debtors listed on Exhibit G to the Plan (or such other schedule filed
prior to the Effective Date) on and after the Effective Date.
Representative except for BINC, any officer, director, agent, financial advisor, attorney,
professional, accountant, employee or controlling shareholder (direct or indirect) of a
Debtor, in each case, solely in their capacity as such, serving or holding interests on
or after January 1, 2001.
Secured Claim a Claim that is secured by a lien on property in which any or all of the Estates
have an interest or that is subject to setoff under section 553 of the Bankruptcy
Code, to the extent of the value of the Claim holder's interest in the Estates'
interest in such property or to the extent of the amount subject to setoff, as
applicable, as determined pursuant to section 506(a) of the Bankruptcy Code,
provided, however, that solely for the purposes of treatment under the Plan, a
Secured Claim shall not include a Senior Subordinated Note Claim or Interdebtor
Claim.
Senior Lenders Citibank, N.A., and the other lenders who are a party to the Senior Lender
Agreements, solely in their capacity as such.
Senior Lender Agreements that certain Fourth Amended and Restated Credit Agreement, dated as of June 14,
1999, as amended, among AMF Bowling Worldwide, Inc. and the Initial Lenders and
Initial Issuing Banks and Goldman Sachs Credit Partners L.P. and Citicorp
Securities, Inc., as Arrangers, and Goldman Sachs Credit Partners L.P., as
Syndication Agent, and Citibank, N.A., as Administrative Agent, and Citicorp USA,
Inc. as Collateral Agent, and any of the other documents and instruments relating
thereto.
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Senior Lender Cash Payment (i) in the event the Senior Lender Facility is consummated, zero ($0); and (ii) in
the event the Third Party Facility is consummated, an amount of Cash equal to three
hundred million dollars ($300,000,000) minus the sum of: (a) the twelve million
dollars ($12,000,000) necessary to satisfy the Reorganized Company's working
capital needs on or after the Effective Date; (b) amounts necessary to pay Allowed
Claims (other than Senior Lender Claims) hereunder, to the extent such Allowed
Claims are to be paid in Cash pursuant to the Plan, including, but not limited to,
the DIP Refinancing Amount and the Senior Lender Origination Fee; and (c) amounts
to be reserved in respect of items (a) and (b) hereof.
Senior Lender Claim (i) a Claim against any of the Debtors based on the Senior Lender Agreements,
including, without limitation, accrued interest (including any applicable default
rate), minus (ii) all cash payments made by the Debtors to the holders of such
Claims on or after the Commencement Date, including, without limitation, any Claims
of the Senior Lenders that are converted to administrative expense status pursuant
to any Order of the Bankruptcy Court approving the provision of adequate protection
to the Senior Lenders.
Senior Lender Distribution (i) the Senior Lender Cash Payment; (ii) ten million (10,000,000) shares of New AMF
Common Stock; (iii) the Senior Lender Facility Notes; plus (iv) the New AMF Notes.
Senior Lender Facility a credit facility, which consists of the Senior Lender Term Loan Facility and the
Senior Lender Revolving Facility, which may be entered into as of the Effective
Date in accordance with the Plan, by and among the Reorganized Debtors, certain of
the Senior Lenders and a syndicate of banks, financial institutions and other
accredited investors, and which contains those terms set forth in the Plan
Supplement.
Senior Lender Facility Notes in the event the Senior Lender Facility is consummated, the notes issued and
distributed to the Senior Lenders in connection with the Senior Lender Term Loan
Facility.
Senior Lender Origination Fee the origination fees due to the Senior Lenders in an amount equal to two
percent (2.0%) of (i) the principal amount of the New AMF Notes and (ii) to
the extent the Senior Lender Facility is consummated, the principal amount of
the Senior Lender Term Loan Facility.
Senior Lender Revolving a revolving credit facility of up to ninety million dollars ($90,000,000).
Facility
Senior Lender Steering those certain Senior Lenders that Citibank, N.A., in its capacity as administrative
Committee agent under the Senior Lender Agreements, appoints to serve as members of that
certain steering committee of Senior Lenders, as may be reconstituted from time to
time.
Senior Lender Term Loan the Senior Lender Tranche A Facility and Senior Lender Tranche B Facility, which
Facility each shall be provided pursuant to the Senior Lender Facility.
Senior Lender Tranche A a term loan facility of one hundred million dollars ($100,000,000)
Facility minus the amount reasonably expected to be borrowed under the Senior
Lender Revolving Facility to pay costs and expenses in connection with the
Plan, including the payment of Allowed Claims hereunder to the extent such
Allowed Claims are to be paid in Cash pursuant to the Plan, with such amount
to be determined as of the Effective Date.
Senior Lender Tranche B a term loan facility of up to two hundred million dollars ($200,000,000).
Facility
Senior Subordinated Note Claim a Claim against the Debtors for an amount due under the Senior Subordinated Notes.
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Senior Subordinated Notes the 10-7/8% Series A and Series B Senior Subordinated Notes due 2006 and the
12-1/4% Series A and Series B Senior Subordinated Discount Notes due 2006 issued by
WINC.
Subsidiary Debtors each of the Debtors except for WINC and Holdings.
Third Party Facility a credit facility, in an amount not less than three hundred and fifty million
dollars ($350,000,000), of which not less than three hundred million dollars
($300,000,000) would be available to pay the DIP Refinancing Amount, Allowed
Administrative Claims, Allowed Fee Claims, the Senior Lender Cash Payment, and such
other cash amounts as required to be paid under the Plan, entered into as of the
Effective Date, by and among the Debtors, certain third party lenders and a
syndicate of banks, financial institutions and other accredited investors, and
which contains those terms which are reasonably satisfactory to the Senior Lender
Steering Committee.
Unsecured Claim any Claim against any of the Debtors other than an Other Secured Claim, Senior Lender
Claim, AMF Affiliates Claim, Administrative Expense Claim, Priority Tax Claim, Priority
Non-Tax Claim, Fee Claim, Senior Subordinated Note Claim, Interdebtor Claim,
Convenience Claim, Tort Claim, Existing Securities Law Claim, or 510(c) Claim.
Unsecured Claim Total the sum of, without duplication, the aggregate amount of all Allowed Claims in
Classes 4 and 6, plus the Tort Claims Estimate, plus the aggregate of all Claims in
Classes 4 and 6 as set forth in the Estimation Order (except to the extent that such
Claims have been expunged or otherwise disallowed).
Voting Agent Bankruptcy Services, LLC, as voting agent in connection with voting by holders of
Claims to accept or reject the Plan.
Voting Classes a Class that is Impaired under the Plan and that is not deemed to have rejected the
Plan.
Voting Procedures Order an order of the Bankruptcy Court that sets which Claims may vote on the Plan and
designates the form of ballot to be used by each Voting Class.
WINC AMF Bowling Worldwide, Inc., prior to the Effective Date.
7
I. SUMMARY OF DISCLOSURE STATEMENT
A. Purpose of this Disclosure Statement
The purpose of this Disclosure Statement is to provide holders
of Claims that are entitled to vote on the Plan with sufficient information to
allow them to make an informed decision on whether to accept or reject the Plan.
The Debtors are debtors in cases under chapter 11 of the Bankruptcy Code and are
soliciting votes to accept or reject the Plan. The overall purpose of the Plan
is to provide for the restructuring of the Debtors' liabilities in a manner
designed to maximize recoveries to all stakeholders and to enhance the financial
viability of the Reorganized Debtors. A copy of the Plan is attached as Exhibit
A to this Disclosure Statement. Except as otherwise indicated in this Disclosure
Statement, please refer to the Glossary and the Plan for definitions of
capitalized terms used in this Disclosure Statement.
- --------------------------------------------------------------------------------
Non-Debtor Subsidiaries
The Debtors' foreign subsidiaries and certain of their domestic subsidiaries
are not Debtors in the Reorganization Cases and are not in bankruptcy. These
subsidiaries are listed in Exhibit B attached to this Disclosure Statement and
are referred to as the "Non-Debtor Subsidiaries." Debt and equity interests
issued by, and claims against, the Non-Debtor Subsidiaries are not directly
affected by the commencement of the Reorganization Cases and are not
entitled to vote on the Plan.
- --------------------------------------------------------------------------------
This Disclosure Statement:
o describes how Claims against and Equity Interests in the
Debtors will be treated under the Plan (Section I.D.,
"Summary of Distributions to Be Made Under the Plan") and
the terms of the securities to be issued under the Plan
(Section II, "Principal Characteristics of New AMF Common
Stock, New Warrants and New AMF Notes");
o explains how to vote on the Plan and who is entitled to vote (Section
I.C., "Voting");
o estimates the recoveries for holders of Claims and Equity Interests
(Section I.D., "Summary of Distributions to Be Made Under the Plan");
o provides certain financial information about the Reorganized Company,
including operating and financial projections through fiscal 2005 for
Reorganized AMF (Section VI.B., "Financial Projections and Valuation
Analysis" and Exhibit E);
o gives estimated enterprise valuations of the Reorganized Company
(Section VI.B., "Financial Projections and Valuation Analysis" and
Exhibit E);
o presents a liquidation analysis of the Debtors (Exhibit F);
o explains certain legal and practical aspects of implementation of the
Plan (Section III, "Implementation of the Plan");
8
o notes certain risk factors that creditors should consider before voting
(Section IV, "Risk Factors");
o discusses the procedure for confirming the Plan (Section V,
"Confirmation of the Plan");
o describes how Reorganized AMF will be governed when the Plan becomes
effective (Section VI.A., "Reorganized AMF");
o discusses the businesses of the Debtors and the reasons they commenced
their Reorganization Cases (Section VII, "Historical Information");
o summarizes significant events that have occurred in the Reorganization
Cases (Section VIII, "The Cases");
o explains how distributions under the Plan will be made and the manner
in which disputed claims will be resolved (Section X, "Procedures for
Distributions Under the Plan"); and
o summarizes certain federal tax considerations (Section IX, "Certain U.S.
Federal Income Tax Consequences").
- --------------------------------------------------------------------------------
Treatment of BINC and its
relationship to the Reorganization Cases
BINC is not a Debtor in the Reorganization Cases, is not a
proponent of the Plan and will receive no distribution under the
Plan with respect to its Equity Interest in Holdings. For
more information on the rights of BINC as a stockholder
in Holdings, see section I.E.2., "Summary of
Distributions Under the Plan".
- --------------------------------------------------------------------------------
The Plan Supplement will contain the following documents in
substantially the form to be entered into in connection with the implementation
of the Plan: (i) the Amended Bylaws of Reorganized AMF, (ii) the Amended
Certificate of Incorporation of Reorganized AMF, (iii) the New Senior
Subordinated Note Indenture, (iv) the Registration Rights Agreement, (v) the New
Warrant Agreement, including the form of New Warrant; (vi) the form of New AMF
Note; (vii) a commitment letter relating to the Exit Facility; (viii) the New
Management Incentive Plan; and (ix) a form of employment agreement for the chief
executive officer of Reorganized AMF (together, the "Plan Documents"). After it
has been filed, you may obtain a copy of the Plan Supplement by mailing a
written request to Bankruptcy Services, LLC, P.O. Box ____, FDR Station, New
York, New York 10150-5112, or by downloading a copy from the Internet at
www._______.com. The Plan Supplement will be available on or about _______,
2001. All Plan Documents will be subject to revision and modification until the
Confirmation Date. This may result in material changes to the terms of the Plan
Documents.
Additional financial and other information about WINC and the
other Debtors can be found in WINC's Form 10-K for the fiscal year ended
December 31, 2000, its Form 10-Q's for the quarters ended March 31, 2001 and
June 30, 2001 and its other filings from time to time with the Securities and
Exchange Commission (the "Commission" or the "SEC"), each of which is
incorporated in this Disclosure Statement by reference. Copies of these SEC
filings may be obtained over the Internet at www.sec.gov.
9
B. Background of Reorganization Cases
On the Commencement Date, the Debtors each filed a voluntary petition
for relief under chapter 11 of the Bankruptcy Code. Since the Commencement Date,
the Debtors have continued to manage their businesses and affairs in the
ordinary course as debtors in possession under chapter 11 of the Bankruptcy
Code, subject to the control and supervision of the Bankruptcy Court.
On July 17, 2001, the United States Trustee for the Eastern District of
Virginia appointed the Creditors' Committee, an official committee of unsecured
creditors consisting of the persons listed in Exhibit C attached hereto, to
represent the interests of the Debtors' unsecured creditors in the
Reorganization Cases. An informal committee (the "Informal Committee") of
holders of the Senior Subordinated Notes was formed prior to the Commencement
Date and was active before the formation of the Creditors' Committee. The Senior
Lender Steering Committee, consisting of a core group of the Debtors' senior
secured lenders, was also formed before the Commencement Date. A list of members
of the Senior Lender Steering Committee as of the date of this Disclosure
Statement is attached hereto as Exhibit D.
C. Voting
Each holder of a Claim of a Class that is "Impaired" under the Plan,
but is not deemed to have rejected the Plan, will receive this Disclosure
Statement, the Plan, the Plan Supplement (when filed) and a ballot for accepting
or rejecting the Plan. Any holder of a Claim or Equity Interest whose legal,
contractual or equitable rights are altered, modified or changed by the proposed
treatment under the Plan, or whose treatment under the Plan is not provided for
in section 1124 of the Bankruptcy Code, is considered "Impaired." Each holder of
a Claim or Equity Interest of a Class that is deemed to accept or reject the
Plan will receive this Disclosure Statement, but will not receive the Plan or
the Plan Supplement, will not receive a ballot and will not be eligible to vote
on the Plan.
- --------------------------------------------------------------------------------
Which Classes of Claims are Entitled to Vote on the Plan?
Classes of Claims are entitled to vote on the Plan as follows:
o Claims in Classes 2, 3, 4, 5, 6 and 9 are Impaired and entitled to vote
on the Plan.
o Claims in Classes 1 and 7 are Unimpaired under the Plan, are deemed to
have accepted the Plan and will not be entitled to vote on the Plan.
o Claims in Classes 8, 11 and 12, and Equity Interests in Class 10, will
receive no distribution under the Plan, are deemed to have rejected the
Plan and will not be entitled to vote on the Plan.
o For a description of the Classes of Claims and Equity Interests and
their treatment under the Plan, see section I.E.2., "Summary of
Distributions under the Plan" below.
- --------------------------------------------------------------------------------
You may only vote on the Plan with respect to a Claim if that Claim
belongs to a Class that is Impaired under the Plan and is not deemed to have
rejected the Plan. The Bankruptcy Court has fixed ________, 2001 as the voting
record date. To be eligible to vote on the Plan, persons with Claims that belong
to the Voting Classes must have held them on the voting record date.
10
Under the Bankruptcy Code, the Plan will be deemed accepted by
an Impaired Class of Claims if the Voting Agent receives votes accepting the
Plan representing at least:
o two-thirds of the total dollar amount of the allowed Claims in the
Class that cast a vote; and
o more than one-half of the total number of allowed Claims in the Class
that cast a vote.
The Voting Procedures Order sets which Claims are "allowed" for purposes of
voting and designates the form of ballot to be used by each Voting Class.
All properly completed ballots received by the voting agent
before_:__ _.m. (Eastern time) on ____________, 2001 (the "Voting Deadline"),
will be counted in determining whether each Impaired Class entitled to vote on
the Plan has accepted the Plan. Any ballots received after the Voting Deadline
will not be counted. All ballots must contain an original signature to be
counted. No ballots received by facsimile will be accepted.
- --------------------------------------------------------------------------------
Voting on the Plan
When does the vote need to be received? The deadline for the
receipt by the Voting Agent of properly completed ballots
is _:__ _.m., ____________, 2001.
Which Classes may vote? Persons may vote to accept or reject
the Plan only with respect to Allowed Claims that belong to a
Class that is Impaired under the Plan and is not deemed to
have rejected the Plan. These are Classes 2, 3, 4, 5, 6, and 9
only.
Which members of the Impaired Classes may vote? The voting
record date for determining which members of Impaired Classes
may vote on the Plan is _______, 2001. Persons may vote on the
Plan only with respect to Claims that were held on the voting
record date.
How do I vote on the Plan? For a vote to be counted, the
Voting Agent must receive an original signed copy of the
ballot form included with this Disclosure Statement. Faxed
copies and votes sent on other forms will not be accepted.
Whom should I contact if I have questions or need a ballot?
You may contact the Voting Agent at the address or phone
number listed below.
- --------------------------------------------------------------------------------
This Disclosure Statement, the attached exhibits, the Plan and the
Plan Supplement are the only materials that you should use in determining
how to vote on the Plan. The Plan reflects an agreement and compromise among the
Debtors and the Senior Lender Steering Committee, under which the Debtors'
existing indebtedness will be cancelled and exchanged for Cash, the Senior
11
Lender Facility Notes (if applicable), the New AMF Notes, the New Warrants
and/or the New AMF Common Stock, in each case to be distributed in accordance
with the terms of the Plan. The Debtors believe that approval of the Plan is
their best opportunity to emerge from their Reorganization Cases and return
their businesses to financial viability. The Senior Lender Steering Committee
fully supports the Plan.
- --------------------------------------------------------------------------------
Voting Recommendations
The Debtors believe that the Plan presents the best opportunity for
holders of Claims to maximize their recoveries and for the business
operations of the Debtors to succeed. The Debtors encourage holders
of Claims to vote to accept the Plan.
The Senior Lender Steering Committee, as representative of the
holders of the Senior Lender Claims has participated fully in the
reorganization process and also urges holders of Claims to vote to
accept the Plan.
- --------------------------------------------------------------------------------
The ballots have been specifically designed for the purpose of
soliciting votes on the Plan from each Class entitled to vote. For this reason,
in voting on the Plan, please use only the ballot sent to you with this
Disclosure Statement. If you hold Claims in more than one Class, you must use a
separate ballot for voting with respect to each Class of Claims that you hold.
If you believe you have received the incorrect form of ballot, you need another
ballot or have any questions concerning the form of ballot, please contact the
Voting Agent.
Please complete and sign your ballot and return it in the enclosed
pre-addressed envelope to the Voting Agent. All correspondence in connection
with voting on the Plan should be directed to the Voting Agent at the following
address:
- --------------------------------------------------------------------------------
Voting Agent
AMF Balloting Center
c/o [Bankruptcy Services, LLC]
P.O. Box ____
FDR Station
New York, NY 10150-5112
Phone: 1-800-
- --------------------------------------------------------------------------------
The Voting Agent will prepare and file with the Bankruptcy Court a
certification of the results of the voting on the Plan on a Class-by-Class
basis.
Additional copies of the ballots, this Disclosure Statement and the
Plan, and copies of the Plan Supplement (when filed), are available upon request
made to the Voting Agent. Please contact the Voting Agent with any questions
relating to voting on the Plan.
12
- --------------------------------------------------------------------------------
Your Vote Is Important
Your vote on the Plan is important because:
o Under the Bankruptcy Code, a plan of reorganization can only
be confirmed if certain majorities in dollar amount and number
of claims (as described above) of each Impaired Class under
the plan vote to accept the plan, unless the "cram down"
provisions of the Bankruptcy Code are used.
o Under the Bankruptcy Code, only the votes of those holders of
claims or interests who actually submit votes on a plan are
counted in determining whether the specified majorities of
votes in favor of the plan have been received.
o If you are eligible to vote with respect to a Claim and do not
deliver a properly completed ballot relating to that Claim by
the voting deadline, you will be deemed to have abstained from
voting with respect to that Claim and your eligibility to vote
with respect to that Claim will not be considered in
determining the number and dollar amount of ballots needed to
make up the specified majority of that Claim's Class for the
purpose of approving the Plan.
- --------------------------------------------------------------------------------
The Debtors are seeking to "cram down" the Plan on certain
non-accepting Classes of Claims and Equity Interests. See section V.D.3, "Cram
Down" below for a discussion of the "cram down" procedures under the Bankruptcy
Code.
In accordance with Bankruptcy Rule 3017(d), the Debtors will
send ballots to transfer agents, registrars, servicing agents, or other
intermediaries holding Claims for, or acting on behalf of, beneficial holders of
Claims (collectively, the "Intermediaries"). Each Intermediary will be entitled
to receive, upon request to the Debtors, a reasonably sufficient number of
ballots to distribute to the beneficial owners of the Claims for which it is an
Intermediary, and the Debtors will be responsible for and pay each such
Intermediary's reasonable costs and expenses associated with the distribution of
ballots to the beneficial owners of such Claims and tabulation of the ballots.
Additionally, each Intermediary will receive returned ballots and will tabulate
and return the results to the Voting Agent in a summary ballot by _____ _.m.
(Eastern time) on ___________, 2001, indicating the number and dollar amount of
cast ballots in the group of Claim holders for which it is an Intermediary. The
Intermediaries must certify that each beneficial holder has not cast more than
one vote with respect to any given Claim for any purpose, including both for
determining the number of votes and the amount of the Claim, even if such holder
holds securities of the same type in more than one account. However, persons who
hold Claims in more than one voting Class will be entitled to one vote in each
such Class, subject to the applicable voting rules.
13
- --------------------------------------------------------------------------------
IMPORTANT - Voting By Intermediary
Timing: If your vote is being processed by an Intermediary,
please allow time for transmission of your ballot to your
Intermediary and from the Intermediary to the Voting Agent.
Your vote must be received by the Voting Agent on or before
the voting deadline to be counted. Receipt by the Intermediary
on or close to the voting deadline may not allow sufficient
time for the Intermediary to send your ballot to the Voting
Agent by the voting deadline.
Questions on Voting Procedures: If you have a question
concerning the voting procedures, please contact your
Intermediary.
- --------------------------------------------------------------------------------
D. Effects of Exit Financing on Distributions Under the Plan
In connection with implementation of the Plan, Reorganized AMF
will enter into the Exit Facility for payment of certain Classes of Claims under
the Plan and for working capital purposes. Although the Debtors do not yet have
a binding commitment for an Exit Facility, they expect that any Exit Facility
entered in connection with the Plan, irrespective of whether the Exit Facility
is a Third Party Facility or the Senior Lender Facility, is likely to:
o be secured by substantially all of the assets of the Reorganized
Debtors;
o constitute senior debt of the Reorganized Debtors ranking pari passu
with other senior indebtedness of the Reorganized Debtors;
o consist of a revolving credit facility and a term loan facility in a
combined aggregate amount of not less than $350 million; and
o include other terms and covenants, representations and
warranties customary for credit facilities of a similar
size for debtors in similar circumstances.
The Debtors expect to enter into the Third Party Facility as
the Exit Facility. If the Debtors are unable to consummate the Third Party
Facility as the Exit Facility, they expect to enter into the Senior Lender
Facility. Although the Debtors do not yet have a binding commitment with respect
to the Senior Lender Facility, they have reached an agreement in principle with
the Senior Lender Steering Committee regarding the general terms of the Senior
Lender Facility, which are described in section III.B.2, "Exit Facility - Senior
Lender Facility."
14
- --------------------------------------------------------------------------------
No Exit Financing Commitment
The Debtors do not yet have a binding commitment with respect
to any Exit Facility and cannot assure you that they will
reach agreement for an Exit Facility in an amount and on terms
acceptable to the Debtors. The assumptions relating to
projections and the recoveries with respect to claims under
the Plan used throughout this Disclosure Statement are based
on the assumption that the Debtors will obtain an Exit
Facility and that the Exit Facility will be a Third Party
Facility with the terms described in section III.B. "Exit
Facility" below.
- --------------------------------------------------------------------------------
The Debtors' election of one Exit Facility over another
primarily impacts the Senior Lender Distribution. If the Exit Facility is the
Senior Lender Facility, the Senior Lenders will not receive Cash with respect to
the Senior Lender Claims under the Plan and will instead receive a pro rata
share of up to $300 million in aggregate principal amount of Senior Lender
Facility Notes issued under the Senior Lender Facility. In addition, if the
Senior Lender Facility is consummated, amounts to be paid in Cash under the Plan
will be funded through cash on hand and, to the extent necessary, by borrowings
under the Senior Lender Revolving Facility. This will result in Reorganized AMF
having a capital structure with more indebtedness under short term revolving
loans than is likely under a Third Party Facility, under which such Claims are
expected to be paid with the proceeds of term notes. See section III.B.1. "Exit
Facility-Third Party Facility" for a description of the impact of the Third
Party Facility on distributions under the Plan.
E. Summary of Distributions to Be Made Under the Plan
The following table and description contains a brief summary
of the classification and treatment of Claims and Equity Interests and the
consideration contemplated to be distributed to the holders of such Claims and
Equity Interests under the Plan. Unless otherwise noted, these estimates are as
of December 31, 2001. For an explanation of the assumptions and uncertainties
regarding these calculations, see section IV, "Risk Factors" and section VI.B.,
"Financial Projections and Valuation Analysis" below.
As further described below, the Plan provides for
distributions of Cash, shares of New AMF Common Stock, New Warrants, Senior
Lender Facility Notes (if applicable) and/or New AMF Notes in satisfaction of
Allowed Claims. These distributions vary in amount and the type of security
distributed, as well as whether Cash is included in the distribution, depending
on the Class of the Claim. Additionally, as noted in the previous section, the
amounts and types of distributions under the Plan will be affected by whether
the Exit Facility is the Senior Lender Facility or a Third Party Facility.
15
1. Summary of Classification and Treatment of Claims
Estimated
Estimated Recovery (%
Class Description Treatment Allowable Amount Of Claim) Voting
- ----- ----------- --------- ---------------- ----------- ------
Class 1 Other Secured Such treatment that either $_______ 100% Unimpaired
Claims (i) leaves unaltered the (deemed to
legal, equitable or accept and not
contractual rights to which entitled to
the holder of such Allowed vote)
Other Secured Claim is
entitled or (ii) leaves such
Allowed Other Secured Claims
unimpaired pursuant to
Section 1124(2) of the
Bankruptcy Code. Any
Allowed Claim based on any
deficiency Claim by a holder
of an Allowed Other Secured
Claim will be treated as an
Allowed Unsecured Claim and
will be classified as a
Class 4 Claim.
Class 2 Senior Lender A pro rata share of the $620,536,000 99.2%* Impaired
Claims Senior Lender Distribution, (expected to (entitled to
comprised of (1) the Senior include the vote)
Lender Cash Payment (if Senior Lender
applicable), (2) ten million Facility Notes
(10,000,000) shares of New or a cash
AMF Common Stock, (3) the payment
Senior Lender Facility Notes estimated to
(if applicable), plus (4) be
the New AMF Notes. The approximately
Senior Lenders will also $268 million,
receive a pro rata share of the New AMF
the Senior Lender Notes and
Origination Fee. 10,000,000
shares of New
AMF Common
Stock)
Class 3 Priority Non-Tax Unless otherwise agreed, $_______ 100% (to be Impaired
Claims Cash in an amount equal to paid in cash) (entitled to
its Claim. vote)
- -------------------
* Assumes an Enterprise Value of $665 million for purposes of implementing
the plan.
16
Estimated
Estimated Recovery (%
Class Description Treatment Allowable Amount Of Claim) Voting
- ----- ----------- --------- ---------------- ----------- ------
Class 4 Unsecured Claims A pro rata share of the $_________ ___%* Impaired
Ratable Class 4 Portion of (expected to (entitled to
the New Warrants. include New vote)
Warrants to
acquire
_______ shares
of New AMF
Common Stock)
Class 5 Tort Claims To the extent that any $_______ ___%* Impaired
portion of a Tort Claim is (expected to (entitled to
not an Insured Claim, a pro include New vote)
rata share of the Ratable Warrants to
Class 5 Portion of the New acquire ______
Warrants. Any portion of a shares of New
Tort Claim that becomes an AMF Common
Allowed Claim and is an Stock)
Insured Claim will be paid
in the ordinary course of
business directly or
indirectly by the applicable
carrier to the extent of
such insurance.
Class 6 Senior A pro rata share of the $573,762,946 ___%* Impaired
Subordinated Note Ratable Class 6 Portion of (expected to (entitled to
Claims the New Warrants. include New vote)
Warrants to
acquire _____
shares of New
AMF Common
Stock)
Class 7 Convenience Claims Unless otherwise agreed, $_______ 100% (payable Unimpaired
Cash in an amount equal to in cash) (deemed to
the Claim. accept and not
entitled to
vote)
Class 8 Interdebtor Claims No distribution. N/A 0% Impaired
(deemed to
reject and not
entitled to
vote)
17
Estimated
Estimated Recovery (%
Class Description Treatment Allowable Amount Of Claim) Voting
- ----- ----------- --------- ---------------- ----------- ------
Class 9 AMF Affiliates Allowed AMF Affiliates $_______ 0% Impaired
Claims Claims will be reinstated on (entitled to
terms and conditions vote)
reasonably satisfactory to
Reorganized AMF.
Class 10 Equity Interests No distribution. All Equity N/A 0% Impaired
Interests in Holdings and (deemed to
WINC will be deemed reject and not
cancelled as of the entitled to
Effective Date. vote)
Class 11 Existing No distribution. $0 0% Impaired
Securities Law (deemed to
Claims reject and not
entitled to
vote)
Class 12 510(c) Claims No distribution. $0 0% Impaired
(deemed to
reject and not
entitled to
vote)
- --------------------------------------------------------------------------------
Treatment of Holders of Common Stock
of Holdings and WINC
BINC and Holdings, as the sole holders of common stock in
Holdings and WINC, respectively, will not be entitled to
receive any distribution under the Plan. The existing common
stock of Holdings and WINC will be cancelled under the Plan
and Holdings and BINC will be automatically deemed to reject
the Plan and will not be entitled to vote with respect to
these shares.
- --------------------------------------------------------------------------------
The Debtors expect that an aggregate of 10,000,000 shares of
New AMF Common Stock will be issued under the Plan, with an additional _________
shares reserved for issuance upon exercise of the New Warrants and an additional
1,549,587 shares reserved for issuance in connection with the exercise of
options to be granted under the New Management Incentive Plan. Based on the
above estimates, immediately after the consummation of the Plan, the ownership
of Reorganized AMF will be as described in the table below. The information in
this table is based on an assumed Enterprise Value of $665 million. See section
VI.B., "Financial Projections and Valuation Analysis" of this Disclosure
Statement for an explanation of the calculations and assumptions used in
reaching this assumed Enterprise Value.
18
Shares of New
AMF Common
Shares of New Stock Purchasable Percent Percent Estimated
AMF Common Under New Ownership Ownership Recovery
Stock Warrants (Undiluted) (Diluted)1 (% Of Claim)
------------- ----------------- ----------- ---------- ----------
Class 2 10,000,000 0 100.0% ___% 99.2%
Class 4/2/ 0 34,742 0% ___% ___%
Class 5/2/ 0 _____ 0% ___% ___%
Class 6/2/ 0 _____ 0% ___% ___%
TOTAL 10,000,000 _____ 100% 100% N/A
- --------------------------------------------------------------------------------
/1/ Does not take into account the options to purchase an additional 1,549,587
shares of New AMF Common Stock to be granted under the New Management Incentive
Plan.
/2/ Assumes that New Warrants together have an aggregate value of $10
million and an exercise price of $22.20 per share.
For purposes of implementing the Plan, the shares of New AMF
Common Stock are valued by subtracting the amount of funded indebtedness
outstanding at the Effective Date from the assumed Enterprise Value of $665
million and dividing this amount by the number of shares of New AMF Common Stock
to be issued under the Plan (without giving effect to dilution resulting from
the issuance of the New Warrants or the shares to be issued under the New
Management Incentive Plan). See section VI. B., "Financial Projections and
Valuation Analysis" for a description of how this assumed Enterprise Value was
reached, including certain contingencies that could affect this valuation. The
Enterprise Value is calculated based on commonly accepted valuation analysis and
is not intended to represent values that will be achieved in the public or
private markets for securities distributed under the Plan. The Debtors cannot
assure you that the market value of the New AMF Common Stock at the Effective
Date will reflect the $665 million Enterprise Value used in calculating the
distributions under the Plan or that there will be any trading market for the
New AMF Common Stock after the Effective Date.
2. Summary of Distributions Under the Plan
The following section describes more fully the distributions
to be made to each Class of Claims and Equity Interests under the Plan. This
description is only a summary of certain important provisions of the Plan and
should not replace careful review of the Plan. Each holder of a Claim or Equity
Interest should read the Plan carefully before voting. Please refer particularly
to sections 3 and 4 of the Plan, section III. K. below "Treatment of Claims and
Equity Interests" and the liquidation analysis annexed as Exhibit F hereto for a
more detailed description of the classification and treatment of Claims and
Equity Interests provided under the Plan.
Administrative Expense Claims. In accordance with section
1123(a)(1) of the Bankruptcy Code, Administrative Expense Claims and Priority
Tax Claims, as described below, have not been classified. Unless otherwise
agreed to by the parties, each holder of an Allowed Administrative Expense Claim
(except for those representing liabilities incurred in the ordinary course of
business during the Reorganization Cases and certain liabilities under loans and
advances in the Reorganization Cases) will receive Cash equal to the unpaid
portion of such Allowed Administrative Expense Claim on the later of the
Effective Date and the first Business Day thirty days after the date on which
the Administrative Expense Claim is Allowed.
19
Allowed Administrative Expense Claims that represent
liabilities incurred by the Debtors in the ordinary course of business during
the Reorganization Cases or liabilities arising under loans or advances to or
other obligations incurred by the Debtors as debtors-in-possession, whether or
not incurred in the ordinary course of business, will be paid in the ordinary
course of business, consistent with past practice and in accordance with the
terms and subject to the conditions of any orders or agreements governing,
instruments evidencing, or other documents relating to, such transactions. Any
postpetition expenses of the indenture trustees for the Senior Subordinated
Notes and the reasonable postpetition fees and expenses of their respective
counsel will be paid as Administrative Expense Claims to the extent such fees
and expenses are reasonable and to the extent approved by the Bankruptcy Court
after notice and a hearing.
Unless otherwise specified in the Plan or by order of the
Bankruptcy Court, no interest will accrue or be paid in connection with an
Allowed Administrative Expense Claim for any purpose, on or after the
Commencement Date.
Other than ordinary course of business expenses, the Debtors
believe that Administrative Expense Claims consist of professional fees for the
Debtors and the various committees appointed in the Reorganization Cases. Such
fees are difficult to estimate and will vary depending on the length of the
Reorganization Cases and the complexity and length of any related litigation.
The Debtors have budgeted approximately $___ million for Administrative Expense
Claims that are not expenses arising in the ordinary course of business.
Bar Date for Administrative Expense Claims.
Pre-Effective Date Claims and Expenses. No proof of
Administrative Expense Claim or application for payment of an Administrative
Expense Claim need be filed for the allowance of any of the following types of
Claims:
o expenses or liabilities incurred in the ordinary course of the
Reorganized Debtors' businesses on or after the Effective Date;
o Administrative Expense Claims held by trade vendors where such
administrative liability was incurred by a Debtor in the ordinary
course of the Debtor's and such creditor's business after the
Commencement Date;
o Fee Claims (which are discussed below);
o fees of the United States Trustee arising under 28 U.S.C.ss. 1930.
To be eligible for payment under the Plan, all persons
asserting Administrative Expense Claims of any kind not described above arising
on or after the Commencement Date must file and serve proofs of such Claims
pursuant to the procedures in the Confirmation Order or notice of entry of
Confirmation Order, no later than forty-five (45) days after the Effective Date.
Expenses and liabilities incurred on or after the Effective
Date are not subject to the Plan or the treatment of Claims described in this
Disclosure Statement. All of the Administrative Expense Claims described above
other than Fee Claims will be paid by the Estates in the ordinary course of
business. Fee Claims will be paid as described below.
20
Effect of Failure to Timely File Claim or Requests for
Payment. Any request for payment of an Administrative Expense Claim that is not
exempt from the Bar Date and is not filed by the applicable deadline set forth
in section 2.2 of the Plan will be barred. Any Persons that fail to file a proof
of Administrative Expense Claim or request for payment thereof on or before the
Administrative Bar Date as required under the Plan will be forever barred from
asserting such Claim against any of the Debtors, the Estates, the Reorganized
Debtors or their property and the holder thereof will be enjoined from
commencing or continuing any action, employment of process or act to collect,
offset or recover such Administrative Expense Claim.
Fee Claims. All persons seeking an award by the Bankruptcy
Court of a Fee Claim incurred through and including the Effective Date are
required (unless otherwise ordered by the Bankruptcy Court) to file final
applications for the allowance of compensation for services rendered and
reimbursement of expenses incurred within 45 days after the Effective Date.
Holders of Fee Claims that file final applications in accordance with the Plan
will be paid in full in the amounts approved by the Bankruptcy Court on the date
on which the order relating to any such Fee Claim is entered or on other terms
mutually agreed on between the Fee Claim holder and the Debtors or, as
applicable, the Reorganized Debtors. The Debtors have budgeted approximately
$___ million for Fee Claims.
Priority Tax Claims. Unless otherwise agreed to by the
parties, each holder of an Allowed Priority Tax Claim will receive, at the sole
option of the Reorganized Debtors:
o Cash equal to the unpaid portion of its Allowed Priority Tax Claim, to be
paid on or as soon as practical after the later of the Effective Date or
the first Business Day 30 days after the date on which that Priority Tax
Claim was Allowed; or
o equal annual Cash payments in an aggregate amount equal to the amount of
such Allowed Priority Tax Claim, together with interest at a fixed annual
rate, paid over a period not longer than six years after the date the
Allowed Priority Tax Claim was assessed. These payments will begin on or
as soon as practical after the later of the Effective Date or the first
Business Day 30 days after the date on which the Priority Tax Claim was
Allowed.
The Debtors estimate, based on their records, that Allowed
Priority Tax Claims will be approximately $___ million.
DIP Lender Claims. On the Effective Date, the Debtors will pay
or cause to be paid in Cash all amounts outstanding and any unpaid obligations
under the DIP Facility. The Debtors expect that the Reorganized Debtors will pay
amounts outstanding under the DIP Facility with the proceeds of the Exit
Facility and/or cash from operations. After the DIP Lenders Claims are paid in
full, the DIP Facility and any agreements or instruments related to it will
terminate, subject to any exceptions that the Bankruptcy Court may approve. On
the Effective Date, any outstanding letters of credit issued under the DIP
Facility will either be cash collateralized, replaced or secured by letters of
credit issued under the Exit Facility. The Debtors estimate that DIP Lender
Claims will be approximately $0 to $10 million, based on an Effective Date of
December 31, 2001.
21
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Interest Will Not Accrue After Commencement Date
Unless otherwise specified in the Plan or by order of the
Bankruptcy Court, no interest will accrue or be paid on an
Allowed Claim, for any purpose, on or after the
Commencement Date.
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Class 1 -- Summary of Distributions to Holders of Other Secured Claims.
Class 1 is Unimpaired and deemed to accept the Plan. For this
reason, holders of Other Secured Claims are not entitled to vote on the Plan.
Deficiency Claims. Any Allowed Claim based on any deficiency
Claim by a holder of an Allowed Other Secured Claim will become, and will be
treated for all purposes under this Plan as an Allowed Unsecured Claim and will
be classified as a Class 4 Claim.
Amount of Allowed Other Secured Claims. The Debtors estimate
the aggregate amount of Other Secured Claims likely to be Allowed is
approximately $ ____. This estimated amount does not include prepetition real
property and personal property taxes that purport to carry lien rights, and
prepetition contractor claims that may have ripened into mechanics liens, which
the Debtors estimate together amount to approximately $ ____.
Treatment Under Plan. With respect to each Other Secured
Claim, on or as soon as reasonably practicable after the later of: (a) the
Effective Date; and (b) the first Business Day after thirty calendar days after
the date on which an Other Secured Claim becomes Allowed, the holder of such
Allowed Other Secured Claim will receive such treatment that either (i) leaves
unaltered the legal, equitable, or contractual rights to which the holder of
such Allowed Other Secured Claim is entitled or (ii) leaves such Allowed Other
Secured Claims unimpaired pursuant to Section 1124(2) of the Bankruptcy Code.
In connection with a claim in the amount of $ ______________
relating to debt incurred under a Note and Deed of Trust and Security Agreement
made March 28, 1984, between Tay-Gal Investments, Ford Nelson, Jr., as Trustee
of Jackson County, Missouri and Blue Ridge Bank and Trust Co. for the purchase
of the King Louie Lenexa bowling center in Independence, Missouri, the Debtors
currently intend to elect to cure any outstanding default and reinstate a
purchase money mortgage applicable to the land and building comprising the
bowling center. The Debtors also currently intend to elect to reinstate an
Equipment and Services Agreement between Hughes Network Systems, A Hughes
Electronics Corporation Company and AMF Bowling Centers, Inc., dated June 22,
2000, as subsequently amended covering certain satellite equipment and a
services agreement relating to satellite communications services delivered over
that equipment, under which the Debtors will continue to have obligations in the
amount of $ _______________. Each of the purchase money mortgage, satellite
capital lease and satellite services agreement will be treated as an Other
Secured Claim (Class 1) and will remain in effect against Reorganized AMF after
the Effective Date.
Class 2 -- Summary of Distributions to Holders of Senior Lender Claims.
Assuming for illustration purposes an Effective Date of
December 31, 2001, the Senior Lender Claims will be Allowed in an aggregate
amount of approximately $620.5 million. Such amount consists of: (i) $614.4
million, representing the outstanding principal amount due under the Senior
22
Lender Agreements, including (a) $52.5 million in respect of term loan advances,
(b) $181.5 million in respect of AXELs Series A advances, (c) $131.1 million in
respect of AXELs Series B Advances, and (d) $249.3 million in respect of working
capital advances; and (ii) $6.1 million, representing the amount of unpaid,
accrued interest under the Senior Lender Agreements, which consists of the
increment of default rate interest, which has accrued and is in excess of the
contract rate interest which was paid by the Debtors to the Senior Lenders
during the Reorganization Cases. This amount does not include amounts relating
to letters of credit that have been issued but were not drawn at the time of
this Disclosure Statement or commitment, agent's, letter of credit and other
fees, costs, charges and expenses that may be incurred by the Senior Lenders
pursuant to the Senior Lender Agreements. Inasmuch as certain amounts set forth
in the preceding sentence will fluctuate based on the date of the Effective
Date, the amount of the Allowed Senior Lenders Claims may be different from the
amount estimated above. Interest will be paid with respect to the Class 2 Claims
at a default rate during the pendency of the Reorganization Cases.
Under the Plan, each holder of an Allowed Senior Lender Claim
will receive, in complete settlement, satisfaction and discharge of its Class 2
Claim, its pro rata share of:
o the Senior Lender Cash Payment (if applicable);
o ten million (10,000,000) shares of the New AMF Common Stock;
o the Senior Lender Facility Notes (if applicable); and
o the New AMF Notes.
The amount of the Senior Lender Cash Payment will depend on
which Exit Facility is consummated. If the Third Party Facility is consummated
as the Exit Facility, the Senior Lender Cash Payment will consist of an amount
of Cash equal to three hundred million dollars ($300,000,000) minus the sum of:
o the twelve million dollars ($12,000,000) necessary to satisfy the
working capital needs of the Reorganized Debtors and each of their
non-debtor subsidiaries on or after the Effective Date;
o amounts necessary to make the cash payments for Allowed Claims (other
than Senior Lender Claims) and the other cash payments required under
the Plan, including, but not limited to, the DIP Refinancing Amount and
the Senior Lender Origination Fee; and
o amounts to be reserved in respect of the above amounts.
If the Senior Lender Facility is consummated, the Reorganized Debtors will not
make any Senior Lender Cash Payment.
The Senior Lender Facility Notes will only be issued if the
Senior Lender Facility is consummated. If consummated, the Senior Lender
Facility is expected to comprise a Senior Lender Term Loan Facility and a Senior
Lender Revolving Facility, which the Reorganized Debtors would initially borrow
under to pay costs and expenses in connection with the Plan, including the
payment of Allowed Claims to the extent such Allowed Claims are to be paid in
cash pursuant to the Plan. The Senior Lender Facility Notes would be issued in
two tranches in lieu of a Senior Lender Cash Payment in initial aggregate
principal amounts of up to two hundred million dollars ($200,000,000) under a
Tranche B Note and under a Tranche A Note, one hundred million dollars
($100,000,000) minus the amount reasonably expected to be borrowed under the
23
Senior Lender Revolving Facility to pay costs and expenses in connection with
the Plan, including the payment of Allowed Claims to the extent such Allowed
Claims are to be paid in cash pursuant to the Plan, with such amount to be
determined as of the Effective Date. If the Senior Lender Facility is the Exit
Facility, the Reorganized Debtors would likely need to borrow under the Senior
Lender Revolving Facility to satisfy most of the Allowed Claims that are to be
paid in cash under the Plan (other than Senior Lender Claims) and the other cash
payments required under the Plan, including, but not limited to, the DIP
Refinancing Amount and the Senior Lender Origination Fee. To the extent
Reorganized AMF's cash needs are less than estimated on the Effective Date, the
Reorganized Debtors would borrow less cash under the Senior Lender Revolving
Facility in connection with the Effective Date.
The New AMF Notes will be issued in an aggregate principal
amount of $150 million at an interest rate of 13.00%.
In addition to the distributions to be made under the Plan in
respect of the Senior Lender Claims, each Senior Lender Claim will also be
entitled to a pro rata share of the Senior Lender Origination Fee, which is an
origination fee in an aggregate amount equal to 2.0% of the aggregate principal
amount of the New AMF Notes and, if applicable, 2.0% of the principal amount of
the Senior Lender Term Loan Facility. The Senior Lender Origination Fee will be
paid as an Administrative Expense Claim in connection with the issuance of the
New AMF Notes and, if applicable, the Senior Lender Facility Notes.
The Debtors believe that the property distributed in respect
of the Senior Lender Claims is of a value such that they will be paid
substantially in full under the Plan. Because the Plan does not leave the legal,
equitable, and contractual rights of the holders of Class 2 Claims unaltered,
Class 2 is Impaired.
Class 3 -- Summary of Distributions to Holders of Priority Non-Tax Claims.
Under the Plan, Class 3 consists of all Priority Non-Tax
Claims. Allowed Claims in Class 3 are Impaired.
Unless the holder of an Allowed Priority Non-Tax Claim agrees
to a different treatment of its Claim, each holder will receive, in full
satisfaction of its Claim, Cash equal to the Claim, on or as soon as reasonably
practical after the later of (i) the Effective Date and (ii) the first Business
Day that is thirty (30) calendar days after the date (a) such Claim becomes
Allowed and (b) for payment as alternatively agreed to by the parties.
Class 4 -- Summary of Distributions to Holders of Unsecured Claims.
Under the Plan, Class 4 consists of all Unsecured Claims.
Class 4 is Impaired.
The Debtors estimate that the aggregate amount of Unsecured
Claims will be approximately $_________. The Debtors believe that a significant
portion of the Unsecured Claims is unliquidated, contingent and/or subject to
dispute and, therefore, the Debtors' estimate of the value of Claims as of the
Commencement Date is subject to continued updating and revision. There are
approximately _____ holders of Class 4 Claims. Due to the nature of these
Claims, the Debtors are unable to state with certainty the aggregate amount of
such claims.
24
Unsecured Claims associated with the rejection of an executory
contract or unexpired lease will be treated as Class 4 Claims unless otherwise
agreed with the claimant.
Each holder of an Allowed Class 4 Claim will receive a pro
rata share of the Class 4 Distribution. The Class 4 Distribution consists of the
New Warrants allocated for payment of Class 4 Claims, the amount of which is
determined by multiplying the Ratable Class 4 Portion by the amount of New
Warrants. As discussed more fully below, each holder of an Allowed Unsecured
Claim may also receive further distributions of New Warrants after the Initial
Distribution Date.
For the purpose of calculating the initial distribution of New
Warrants to holders of Class 4 Claims:
"Ratable Class 4 Portion" means a fraction,
o the numerator of which is the sum of, without duplication, the amount of
Claims in Class 4 that are estimated to be Allowed pursuant to the
Estimation Order plus the amount of Allowed Claims in Class 4
o and the denominator of which is the Unsecured Claim Total.
Because the initial distribution of New Warrants with respect
to Class 4 Claims will be based on an estimate of the amount of Claims in Class
4 that are likely to be Allowed, subsequent distributions (each, a "Catch-Up
Distribution") will be made with respect to Class 4 Claims after determinations
are made on the amount of Allowed Class 4 Claims.
Distributions with respect to Claims in Class 4 will be made
according to the following procedures. On the Initial Distribution Date, the
Disbursing Agent will distribute the New Warrants allocable to Allowed Claims
held by members of Class 4. For the purpose of calculating the amount of New
Warrants to be distributed to holders of Allowed Claims in Class 4 on the
Initial Distribution Date, all Disputed Claims in Class 4 will be treated as
though such Claims will be Allowed Claims in the amounts asserted or provided in
the Estimation Order, as applicable.
To the extent it is determined that the amount of any Disputed
Claim exceeds the amount of such Claim that is ultimately Allowed, any New
Warrants reserved for issuance for such Disputed Claims on account of such
excess will be issued and distributed pro rata to other holders of Allowed
Claims in Class 4 in a Catch-up Distribution. The Disbursing Agent will
distribute New Warrants to the holders of Disputed Claims that become (in whole
or in part) Allowed Claims after the Effective Date in an amount equal to the
amount of New Warrants that would have been distributed as of such date to such
holder in respect of such Allowed Claim if it had been an Allowed Claim on the
Initial Distribution Date. The Disbursing Agent will have the right to
determine, in its reasonable, sole discretion, the timing of any Catch-Up
Distributions.
Class 5 -- Summary of Distributions to Holders of Tort Claims.
Under the Plan, Class 5 consists of all Tort Claims. Class 5
is Impaired.
The Plan provides that the insured portion of an Allowed Tort
Claim will be paid solely and exclusively: (i) from the proceeds of insurance
relating to such Insured Claim as and when such proceeds are received; or (ii)
by the applicable insurance carrier to the extent of such insurance.
25
To the extent that any portion of an Allowed Tort Claim is not
an Insured Claim, on the Final Distribution Date, the holders will receive a pro
rata share of the Class 5 Distribution. The Class 5 Distribution consists of the
New Warrants allocated for payment of Class 5 Claims, the amount of which is
determined by multiplying the Ratable Class 5 Portion by the amount of New
Warrants.
The "Ratable Class 5 Portion" is a fraction,
o the numerator of which is the amount estimated under the Estimation Order
to be the maximum aggregate amount of all Allowed Tort Claims minus those
Allowed Tort Claims that are estimated to be Allowed Insured Claims and
o the denominator of which is the Unsecured Claim Total.
See Section X.E., "Procedures for Distributions Under the
Plan--Distribution to Class 5" for information on how distributions will be made
under the Plan with respect to Tort Claims.
Class 6 -- Summary of Distributions to Holders of Senior Subordinated Note
Claims.
Under the Plan, Class 6 consists of all Senior Subordinated
Note Claims. Class 6 is Impaired. On or as soon as reasonably practicable after
the later of the Effective Date and the first Business Day 30 calendar days
after the date a Senior Subordinated Note Claim becomes Allowed, the holder of
that Allowed Class 6 Claim will receive in complete settlement, satisfaction and
discharge of its Class 6 Claim its pro rata share of the Class 6 Distribution.
The Class 6 Distribution consists of the New Warrants allocated for payment of
Class 6 Claims, the amount of which is determined by multiplying the Ratable
Class 6 Portion by the amount of New Warrants.
For the purpose of calculating the distribution of New
Warrants to holders of Class 6 Claims:
"Ratable Class 6 Portion" means a fraction,
o the numerator of which is the sum of, without duplication, the amount of
Allowed Claims in Class 6 that are estimated to be Allowed pursuant to the
Estimation Order plus the amount of the Allowed Claims in Class 6
o and the denominator of which is the Unsecured Claim Total.
In addition, as with the Class 4 Claims, because the initial
distribution of New Warrants with respect to Class 6 Claims will be based on an
estimate of the amount of Claims in Class 6 that are likely to be Allowed,
Catch-up Distributions will be made with respect to Class 6 Claims after
determinations are made as to the amount of Allowed Claims. The initial
distributions and the Catch-up Distributions for Class 6 Claims will be made in
the same manner as that described above for Class 4 Claims.
The distributions under the Plan take into account the
relative priority of the Claims in each Class in connection with any applicable
contractual subordination provisions. For this reason, the distributions to the
holders of Senior Subordinated Note Claims in Class 6 will not be subject to
levy, garnishment, attachment, or other legal process by any holder of
indebtedness senior to the indebtedness represented by Senior Subordinated Note
Claims because of contractual subordination rights. On the Effective Date, all
holders of Claims will be deemed to have waived any and all contractual
subordination rights that they may have with respect to a distribution, and the
26
Confirmation Order will permanently enjoin, effective as of the Effective Date,
all holders of Senior Lender Claims from enforcing or attempting to enforce any
such rights with respect to the distributions under the Plan to the holders of
Senior Subordinated Note Claims in Class 6.
Class 7 -- Summary of Distributions to Holders of Convenience Claims.
Under the Plan, Class 7 consists of all Convenience Claims.
Class 7 is Unimpaired.
Except to the extent that a holder of an Allowed Convenience
Claim against any of the Debtors has agreed to a different treatment of its
Claim, each holder of an Allowed Convenience Claim will receive, in full
satisfaction of that Claim, Cash in an amount equal to the lesser of such Claim
and the maximum per Claim amount payable with respect to Convenience Claims,
which under the Plan is $____, on or as soon as reasonably practicable after the
later of (i) the Effective Date; and (ii) the first Business Day that is thirty
(30) calendar days after the date (a) such Claim becomes Allowed and (b) for
payment as alternatively agreed to by the parties.
Under the Bankruptcy Code, the holders of Allowed Convenience
Claims that are to be paid in full are conclusively presumed to accept this Plan
and the votes of those holders will not be solicited with respect to those
Claims.
Class 8 -- Summary of Distributions to Holders of Interdebtor Claims.
Under the Plan, Class 8 consists of all Interdebtor Claims.
Class 8 is Impaired. No distributions will be made on account of Interdebtor
Claims under the Plan.
Under the Bankruptcy Code, the holders of Interdebtor Claims
are conclusively presumed to reject this Plan and the votes of those holders
will not be solicited with respect to those Claims.
Class 9 -- Summary of Distributions to Holders of AMF Affiliates Claims
Under the Plan, Class 9 consists of all AMF Affiliates Claims.
Class 9 is Impaired.
On or as soon as reasonably practicable after the later of the
Effective Date and the first Business Day after the date that is thirty (30)
calendar days after the date an AMF Affiliates Claim becomes Allowed, that
Allowed AMF Affiliates Claim will be reinstated on terms and conditions that are
satisfactory to Reorganized AMF.
Class 10-- Summary of Distributions to Holders of Equity Interests.
Under the Plan, Class 10 consists of all Equity Interests.
Class 10 is Impaired. BINC is the holder of 100% of the outstanding common stock
of Holdings. Holdings is the holder of 100% of the issued and outstanding common
stock of WINC. BINC and Holdings will receive no distribution under the Plan in
respect of their Class 10 Interests, and all shares of common stock held by BINC
in Holdings and held by Holdings in WINC, together with any other Equity
Interests they hold in the Debtors, will be cancelled as of the Effective Date.
All Equity Interests in Debtors other than Holdings and WINC
(other than any such Equity Interest held by another Debtor or an AMF Affiliate)
are required to be delivered to the Debtor that issued them. The respective
Debtor will have the right, in its sole discretion, to cancel or reissue those
Equity Interests in accordance with applicable provisions of the Plan.
27
Each holder of an Equity Interest that is cancelled under the
Plan will neither receive nor retain any property or interest in property on
account of that Equity Interest.
Because they will receive no distribution under the Plan, the
holders of Equity Interests are conclusively presumed to reject this Plan under
the Bankruptcy Code, and their votes will not be solicited with respect to those
Equity Interests.
Class 11 -- Summary of Distributions to Holders of Existing Securities Law
Claims.
Under the Plan, Class 11 consists of all Existing Securities
Law Claims. Class 11 is Impaired. No distribution will be made with respect to
any Existing Securities Law Claim under the Plan. The Debtors do not believe
that any Class 11 Claims exist.
Class 12 -- Summary of Distributions to Holders of Section 510(c) Claims.
Under the Plan, Class 12 consists of all section 510(c)
Claims. Class 12 is Impaired. No distribution will be made with respect to any
Section 510(c) Claim under the Plan. The Debtors do not believe that any section
510(c) Claims exist.
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Important Note on Estimates
The estimates in the tables and summaries in this Disclosure
Statement may differ from actual distributions because of
variations in the nature and amount of the Exit Facility, the
asserted or estimated amounts of Allowed Claims, the existence
of disputed claims and other factors. Statements regarding
projected amounts of claims or distributions (or the value of
such distributions) are estimates by the Debtors based on
current information and are not representations as to the
accuracy of these amounts. Except as otherwise indicated,
these statements are made as of August 31, 2001, and the
delivery of this Disclosure Statement will not, under any
circumstances, imply that the information contained in this
Disclosure Statement is correct at any other time. Any
estimates of claims or interests in this Disclosure Statement
may vary from the final amounts of claims or interests allowed
by the Bankruptcy Court.
In addition, the estimated valuation of the Reorganized
Debtors and the Plan Securities, and the estimated recoveries
to holders of Claims, is not intended to represent the value
at which Reorganized AMF's securities could be sold if a
market for those securities emerges. See section IV, "Risk
Factors."
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F. Confirmation Hearing
The Court will hold the hearing on confirmation of the Plan
(the "Confirmation Hearing") at the following time and place:
28
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Confirmation Hearing
Date and Time: commencing at ____ _.m. (Eastern time), on
____________, 2001.
Place: the United States Bankruptcy Court, Eastern District of Virginia,
1100 E. Main Street, Third Floor, Richmond, Virginia 23219.
Judge: Bankruptcy Judge David H. Adams.
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The Confirmation Hearing may be adjourned from time to time on
announcement in the Bankruptcy Court on the scheduled date for the hearing. No
further notice will be required to adjourn the hearing.
At the Confirmation Hearing, the Bankruptcy Court will:
o determine whether sufficient majorities in number and
dollar amount from each Voting Class have delivered
properly executed votes accepting the Plan to approve the
Plan;
o hear and determine objections, if any, to the Plan and to confirmation
of the Plan that have not been previously disposed of;
o determine whether the Plan meets the confirmation requirements of the
Bankruptcy Code; and
o determine whether to confirm the Plan.
Any objection to confirmation of the Plan must be in writing
and filed and served as required by the Bankruptcy Court under the order
approving this Disclosure Statement. The Disclosure Statement Order requires any
objections to the confirmation of the Plan to be served so as to be received on
or before ____________, 2001 at _____ _.m. (Eastern time) by the following
persons:
o the Office of the United States Trustee for the Eastern District of
Virginia, 200 Granby Street, Room 625, Norfolk, Virginia 23570,
Attn.: Robert B. Van Arsdale, Esq.;
o Co-counsel for the Debtors, Willkie Farr & Gallagher, 787 Seventh
Avenue, New York, New York 10019, Attn.: Marc Abrams, Esq.;
o Co-counsel for the Debtors, McGuire Woods LLP, One James Center, 901
East Cary Street, Richmond, Virginia 23219, Attn.: Dion Hayes, Esq.;
o General counsel to the Debtors, Daniel McCormack, Esq., AMF Bowling
Worldwide, Inc., 8100 AMF Drive, Mechanicsville, Virginia 23111;
o Counsel to the DIP Lenders, Shearman & Sterling, 599 Lexington Avenue,
New York, New York 10022, Attn.: Constance Fratianni, Esq.;
29
o Co-Counsel to the Senior Lenders, Weil, Gotshal & Manges, LLP; 767
Fifth Avenue, New York, New York 10053, Attn.: Brian Rosen, Esq.;
o Co-Counsel to the Senior Lenders, Hunton & Williams, Riverfront Plaza,
951 East Byrd Street, Richmond, Virginia 23219, Attn.: Benjamin
Ackerly, Esq.;
o Co-Counsel to the Creditors' Committee, Debevoise & Plimpton, 875 Third
Avenue, New York, New York 10022, Attn.: Steven R. Gross, Esq.; and
o Co-Counsel to the Creditors' Committee, Troutman Sanders Mays &
Valentine LLP, 1111 East Main Street, Richmond, Virginia 23219,
Attn.: Jonathan L. Hauser, Esq.
G. Claims Represented by Book-Entry Positions with The Depository Trust
Company -- Senior Subordinated Note Claims
Promptly after the Effective Date and in accordance with
section 5.5 of the Plan, the Disbursing Agent will instruct The Depository Trust
Company ("DTC") to cancel the existing positions with respect to the Senior
Subordinated Notes (including the global certificate held in the name of DTC's
nominee Cede & Co.) of each financial institution that is a participant in DTC's
book-entry transfer facility system. Simultaneously with that cancellation, DTC
will execute a book-entry credit for the benefit of each such financial
institution with the number of New Warrants to be issued to such holder of
Senior Subordinated Notes under the Plan (a "book-entry exchange"). In
connection with this book-entry exchange, the Disbursing Agent will deliver to
the warrant agent a global certificate, to be registered in the name of Cede &
Co., representing all of the of New Warrants to be issued with respect to the
Senior Subordinated Note Claims under the Plan.
A beneficial owner of Claims represented by instruments that
are held by or registered in the name of a broker, dealer, commercial bank,
trust company or other nominee or custodian is urged to contact such entity
promptly if such beneficial owner wishes to participate.
H. Cancellation of Existing Securities and Agreements
The Plan provides for the cancellation on the Effective Date,
without any further action by the Debtors or the holders of the Equity Interests
(except for the purpose of evidencing a right to distributions under the Plan of
Reorganization) of all the agreements, instruments, and other documents
evidencing Claims or Equity Interests (except as otherwise expressly provided in
the Plan or the Confirmation Order) or rights of any holder of a Claim against
the Debtors, including options or warrants to purchase Equity Interests, any
agreement obligating the Debtors to issue, transfer, or sell Equity Interests or
the Senior Subordinated Notes.
30
II. PRINCIPAL CHARACTERISTICS OF NEW AMF COMMON STOCK,
NEW WARRANTS AND NEW AMF NOTES
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The Following Summary Is Not a Complete Description
of the Plan or the Plan Securities
This section provides a summary of the securities to be issued
on or after the Effective Date of the Plan and certain other
matters contemplated to occur under or in connection with
confirmation of the Plan. This summary highlights certain
substantive provisions of the Plan and Plan Securities, but is
not, nor is it intended to be, a complete description of the
Plan and Plan Securities or a substitute for a full and
complete reading of the Plan, the Plan Supplement and their
exhibits.
The Debtors encourage you to read the entire Plan, the Plan
Supplement and their exhibits carefully before deciding how to
vote on the Plan.
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The Plan provides that the capital structure of Reorganized
AMF will be comprised of New AMF Notes, New AMF Common Stock, New Warrants and
loans under the Exit Facility. The principal features of the Plan Securities are
summarized below, and the Exit Facility is described in section III.B., "Exit
Facility."
A. New AMF Notes
The New AMF Notes will be issued in an aggregate initial
principal amount of $150 million in respect of Allowed Class 2 Claims under the
Plan. The New AMF Notes will be issued under the New Senior Subordinated Note
Indenture, to be entered into between Reorganized AMF and a trustee to be
selected by Reorganized AMF. The form of the New Senior Subordinated Note
Indenture, which contains the form of the New AMF Notes, will be included in the
Plan Supplement. The New Senior Subordinated Note Indenture will be qualified
under the Trust Indenture Act of 1939, as amended, but the New AMF Notes will
not be registered under the Securities Act of 1933, as amended (the "Securities
Act").
The New AMF Notes will be senior subordinated obligations of
Reorganized AMF with the following material terms:
o The New AMF Notes will bear simple interest at 13.00% per year, payable
semi-annually on March 31st and September 30th, beginning on March 31, 2002.
o The New AMF Notes will mature six years and six months after the Effective
Date.
o Payment of the New AMF Notes will be expressly subordinated to payment of
the Exit Facility (and any other indebtedness designated as senior
indebtedness under the New Senior Subordinated Note Indenture). The New AMF
Notes will rank pari passu with all other existing and future unsecured
debt of Reorganized AMF.
o The New Senior Subordinated Note Indenture is expected to contain
affirmative and negative covenants customary for senior subordinated notes
of this type.
31
o Under the procedure for selecting an Exit Facility contemplated by the Plan,
the Senior Lenders are required to elect whether the New AMF Notes will be
secured by a junior lien on all of the assets of Reorganized AMF on or
prior to __ Business Days before the Confirmation Hearing.
If the New AMF Notes are not paid when due, the holders will
be entitled to exercise their rights and remedies under the New Senior
Subordinated Note Indenture and applicable law.
Upon a change of control, Reorganized AMF will be required to:
o offer to repurchase the New AMF Notes at 101% of their principal amount,
plus accrued interest; and
o have the right to redeem the New AMF Notes at 110% of their principal
amount, plus accrued interest.
"Change of control" is expected to include the acquisition of
more than 50% of the New AMF Common Stock by a single person (other
than certain principal stockholders), a merger of Reorganized AMF such
that a single person (other than certain principal stockholders) owns
50% or more of the voting stock of the surviving entity or the sale of
all or substantially all of Reorganized AMF's assets.
Reorganized AMF will undertake to use its best efforts to have
the New AMF Notes rated by Standard & Poor's Corporation and Moody's Investor
Service, Inc. within 90 days of the Effective Date.
B. New AMF Common Stock
The authorized capital stock of Reorganized AMF will consist
of _________ shares of New AMF Common Stock, par value $0.01 per share, and
_________ shares of voting preferred stock, par value $0.01 per share. The
Debtors expect that an aggregate of 10,000,000 shares of New AMF Common Stock
will be issued with respect to the Senior Lender Claims under the Plan, with an
additional _______ shares reserved for issuance upon exercise of the New
Warrants and an additional 1,549,587 shares reserved for issuance in connection
with the New Management Options to be granted under the New Management Incentive
Plan.
The New AMF Common Stock has the following material terms:
o The holders of New AMF Common Stock will be entitled to one vote per share
for each share held of record on all matters submitted to a vote of
stockholders and are entitled to receive ratably such dividends as may be
declared by the Board of Directors out of funds legally available
therefor.
o Reorganized AMF will be subject to certain limitations on the declaration
and payment of dividends under the terms of the New Senior Subordinated
Note Indenture and the Exit Facility, and it is not anticipated that any
cash dividends will be paid on the New AMF Common Stock for the
foreseeable future.
o Upon a liquidation, dissolution or winding up of Reorganized AMF, holders
of New AMF Common Stock would have the right to a ratable portion of
assets remaining after payment of liabilities and any outstanding
preferred stock. The holders of New AMF Common Stock will have no
preemptive rights.
32
o No preferred stock is being authorized or issued under the Plan, and no
preferred stock will be outstanding on the Effective Date. However, under
the Amended Certificate of Incorporation, Reorganized AMF will be able to
issue shares of voting preferred stock having such terms as the Board of
Directors may authorize from time to time.
C. New Warrants
New Warrants will be issued to holders of Allowed Claims in
Class 4, Class 5 and Class 6. The New Warrants will be issued under the New
Warrant Agreement to be entered into as of the Effective Date between
Reorganized AMF and a warrant agent to be selected by the Reorganized Debtors.
The following summary of the New Warrants is not a complete description of their
terms and is qualified in its entirety by reference to the New Warrant
Agreement, the form of which will be included in the Plan Supplement.
o Holders of the New Warrants will together have the right to purchase an
aggregate of ________ shares of New AMF Common Stock. These shares
represent ___% of the shares to be issued under the Plan, assuming the
exercise in full of the New Warrants, but without giving effect to the
exercise, if any, of the New Management Options to be granted under the
New Management Incentive Plan.
o The exercise price of the New Warrants will be $22.20 per share, based on
an assumed Enterprise Value of $665 million plus $25 million (for purposes
of calculating the exercise price), and assuming the Reorganized Debtors
will have $453 million of funded indebtedness outstanding upon
consummation of the Plan.
o The exercise period for the New Warrants will begin on the Effective Date
and will expire at 5:00 p.m., Eastern time on the seventh anniversary of
the Effective Date. Each New Warrant not exercised before the expiration
of this exercise period will become void, and all rights thereunder will
terminate.
o The New Warrants will be fully transferable, subject to any restrictions
under applicable securities or other laws.
The number and kind of securities purchasable upon the
exercise of the New Warrants and the exercise price therefor will be subject to
adjustment on the occurrence of certain events as set forth in the New Warrant
Agreement, including:
o the issuance of New AMF Common Stock as a dividend or distribution on the
New AMF Common Stock; and
o subdivisions, reclassifications and combinations of the New AMF Common
Stock.
In such an event, the number of shares purchasable upon exercise of the New
Warrants will be adjusted so that the holders receive the kind and number of
shares or other securities the holder would have received if its New Warrants
had been exercised immediately before the event, and the exercise price will be
adjusted accordingly. The terms of the New Warrants will be similarly adjusted
upon a reorganization, merger or consolidation of Reorganized AMF, or the sale
or other transfer of all or substantially all of its assets, so that the holders
of the New Warrants will be entitled to receive, upon the exercise of their New
33
Warrants, the amount of securities, cash or other property that would have been
payable if their New Warrants been exercised immediately prior to such event.
However, the holders of the New Warrants will not be entitled to any other
protections on a change of control of Reorganized AMF.
If Reorganized AMF distributes to the holders of New AMF
Common Stock indebtedness, cash or assets (excluding cash dividends or
distributions from retained earnings or surplus legally available for such
dividends or distributions), the exercise price of the New Warrants will be
adjusted based on the value of the assets distributed (as reflected in the
market price of the New AMF Common Stock).
The exercise price and the number of shares of New AMF Common
Stock will also be adjusted, on a weighted average basis, on the issuance of
shares of New AMF Common Stock, or other securities convertible into or
exchangeable or exercisable for shares of New AMF Common Stock, for a
consideration that is less than the then-current market price of the New AMF
Common Stock.
However, no adjustment in the number of shares purchasable or
the exercise price will be required in connection with:
o the issuance of New AMF Common Stock, warrants, options or other securities
under the New Management Incentive Plan;
o the issuance of New AMF Common Stock, warrants, options or other securities
under any director or employee incentive plan, purchase plan or dividend
reinvestment plan approved by the board of directors of Reorganized AMF;
o the issuance of New AMF Common Stock upon the exercise of the New Warrants
or as otherwise authorized under the Plan; or
o a change in the par value of the New AMF Common Stock.
In addition, no adjustment will be required: (a) if in connection with any of
the events that would otherwise give rise to an adjustment, the holders of the
New Warrants receive such rights, securities or assets as such holders would
have been entitled if the New Warrants had been exercised immediately before
such event; or (b) unless such an adjustment would require at least a 1.0%
change in the aggregate number of shares of New AMF Common Stock issuable upon
the hypothetical exercise of a New Warrant (but any adjustment requiring a
change of less than 1.0% will be carried forward and taken into account in any
subsequent adjustment).
Reorganized AMF and the warrant agent may supplement or amend
the New Warrant Agreement with the approval of the holders of a majority of the
outstanding New Warrants.
D. Registration Rights Agreement
On the Effective Date, Reorganized AMF will execute and
deliver the Registration Rights Agreement, which provides holders of __% or more
of the New AMF Common Stock as of the Effective Date (the "Principal Holders")
with certain rights to require Reorganized AMF to register their shares of New
AMF Common Stock, including shares issuable upon the exercise of their New
Warrants. No registration rights will be provided with respect to the New
Warrants themselves or the New AMF Notes or to holders of New AMF Common Stock
other than the Principal Holders. The following summary is qualified in its
entirety by reference to the Registration Rights Agreement, which will be
included in the Plan Supplement.
34
Under the Registration Rights Agreement, Reorganized AMF will
use its reasonable best efforts to (1) register the New AMF Common Stock held by
a Principal Holder upon a request by one or more Principal Holders to register
not less than __% of the New AMF Common Stock held by the Principal Holders with
a market value of at least $__ million and (2) in connection with any registered
offering of the New AMF Common Stock by Reorganized AMF, register the New AMF
Common Stock of Principal Holders that wish to sell their New AMF Common Stock
in the offering. Each Principal Holder is limited to one "demand" registration
under clause (1) above. In addition, the requests for registration are subject
to other limitations, black-out periods and cut-backs, as set forth in the
Registration Rights Agreement.
The registration rights will not apply to New AMF Common Stock
to the extent that: (1) a registration statement with respect to the sale of New
AMF Common Stock has been declared effective under the Securities Act and the
holders' shares of New AMF Common Stock have been disposed of under such
registration statement; (2) the holders' shares of New AMF Common Stock have
been disposed of (A) under Rule 144 under the Securities Act or (B) under
another exemption from the registration requirements of the Securities Act under
which the shares of New AMF Common Stock are thereafter freely tradable without
restriction under the Securities Act; or (3) the holders' shares of New AMF
Common Stock may be disposed of pursuant to Rule 144 within the volume
limitations thereunder within a 90 day period or pursuant to Rule 144(k) under
the Securities Act.
Holders of __% or more of the New AMF Common Stock will be
entitled to receive the rights granted under the Registration Rights Agreement
by executing and delivering it to Reorganized AMF no later than thirty days
after the Effective Date.
E. Summary of Reorganized AMF Amended and Restated Certificate of
Incorporation and By-Laws
Copies of the Amended Certificate of Incorporation and By-laws
for Reorganized AMF will be included in the Plan Supplement. The following is a
brief summary of the principal provisions of the Amended Certificate of
Incorporation and By-laws.
The authorized capital stock of Reorganized AMF will consist
of _________ shares of New AMF Common Stock, par value $0.01 per share, and
_________ shares of voting preferred stock, par value $0.01 per share. The board
of directors of Reorganized AMF may issue such preferred stock, and designate
the terms thereof (including with respect to voting rights, dividends,
liquidation preferences and conversion rights), without the need for stockholder
approval. Reorganized AMF has no present plans to issue preferred stock. On the
Effective Date, Reorganized AMF will file the Amended Certificate of
Incorporation with the Secretary of State of Delaware and the Amended Bylaws
will be deemed adopted by the Board of Directors of Reorganized AMF.
The Amended Certificate of Incorporation will, among other
things, provide for:
o the prohibition of the issuance of non-voting equity securities, as and to
the extent required by sections 1123(a) and (b) of the Bankruptcy Code; and
o general indemnification of the officers and directors of Reorganized AMF
and the ratification of Reorganized AMF's assumption under section 8.5 of
the Plan of any obligation to indemnify specified representatives with
respect to all present and future actions, suits, and proceedings against
Reorganized AMF or those representatives, based on any act or omission for
or on behalf of the Debtors.
35
An amended certificate of incorporation or other applicable
organizational documents for each of the Reorganized Debtors (other than
Reorganized AMF) will also be filed with the applicable Secretary of State. Such
amended certificates shall prohibit the issuance of nonvoting equity securities,
if necessary.
On the Effective Date, the operation of the Reorganized
Debtors will become the general responsibility of their respective Boards of
Directors or, with respect to limited liability companies or partnerships, other
equivalent internal governance entities who will, thereafter, have the
responsibility for the management, control and operation of the Reorganized
Debtors. For more information on the nominees to the Board of Directors of
Reorganized AMF, see section III.M., "Treatment of Officers and Directors"
below.
III. IMPLEMENTATION OF THE PLAN
A. New Securities and Exit Facility
If the Plan is confirmed and approved by the Bankruptcy Court,
it will be implemented through the actions described in this section. On the
Effective Date, in accordance with section 5 of the Plan, the relevant
Reorganized Debtors:
o will issue the New AMF Notes, the New AMF Common Stock and
the New Warrants (other than the New Warrants to be issued
in connection with the resolution of the Disputed Claims);
o will execute and deliver the New Senior Subordinated Note Indenture,
the New Warrant Agreement and the Registration Rights Agreement; and
o if the Exit Facility is the Senior Lender Facility, issue the Senior
Lender Facility Notes.
B. Exit Facility
As of the date of this Disclosure Statement, the Debtors do
not yet have a binding commitment for the financing of the amounts payable under
the Plan and their ongoing working capital requirements after the Effective
Date. The Plan contemplates that the Debtors will select either the proposed
Senior Lender Facility or the Third Party Facility, if an acceptable alternative
can be found, which will be set forth as the Exit Facility in a notice filed
with the Bankruptcy Court fifteen (15) Business Days before the date of the
Confirmation Hearing. The assumptions relating to projections and the recoveries
with respect to Claims used throughout this Disclosure Statement are based on
the assumption that the Exit Facility will be the Third Party Facility with the
terms described below.
1. Third Party Facility
The Debtors have been engaged in negotiations regarding the
terms of an Exit Facility to be provided by a third party lender. Although the
Debtors do not yet have a binding commitment for a Third Party Facility, they
expect it to comprise a facility for $300 million in aggregate principal amount
of term loans and a revolving credit facility available up to a maximum
aggregate amount of $50 million (under which the Reorganized Debtors would make
no borrowings on the Effective Date). If the Third Party Facility is the Exit
Facility, Reorganized AMF would borrow $300 million under term loan notes on the
36
Effective Date to satisfy its cash payment obligations in connection with the
Plan. The Debtors expect any Third Party Facility to contain additional terms
and conditions customary for an exit facility of similar size under similar
circumstances. Such additional terms must be reasonably satisfactory to the
Senior Lender Steering Committee.
If Reorganized AMF does not consummate the Third Party
Facility as the Exit Facility, it expects to consummate the Senior Lender
Facility on the terms described below.
2. Senior Lender Facility
Although they do not yet have a binding commitment, the
Debtors have reached an agreement in principle with the Senior Lender Steering
Committee relating to a proposed Senior Lender Facility (the "Senior Lender
Facility Proposal"). Under the Senior Lender Facility Proposal, the Debtors and
the Senior Lenders would enter into a Senior Lender Facility consisting of (a) a
Senior Lender Term Loan Facility comprised of the Senior Lender Tranche A
Facility, which would be a term loan facility in an original principal amount of
$100 million (minus the amount reasonably expected to be borrowed under the
Senior Lender Revolving Facility to pay costs and expenses in connection with
the Plan, including the payment of Allowed Claims to the extent such Allowed
Claims are to be paid in cash pursuant to the Plan, with such amount to be
determined as of the Effective Date) and the Senior Lender Tranche B Facility,
which would be a term loan facility in an original principal amount of up to
$200 million, and (b) the Senior Lender Revolving Facility, a revolving credit
facility available up to an aggregate amount of ninety million dollars
($90,000,000).
The Senior Lender Facility would contain other customary terms
and conditions for facilities of a similar size issued under similar
circumstances. As noted above, the Debtors do not yet have a binding commitment
relating to a Senior Lender Facility and cannot assure you that they will
receive such a binding commitment on terms acceptable to the Debtors.
C. Termination and Discharge of All Existing Debts, Claims and Equity Interests
Except as expressly provided for in the Plan or in the
Confirmation Order, the rights afforded in, and the payments and distributions
made under, the Plan will:
o discharge all existing debts and Claims and terminate all Equity Interests
of any kind, nature or description against or in the Debtors or any of
their assets or properties to the fullest extent permitted by section 1141
of the Bankruptcy Code (except for certain interdebtor equity interests
that the Reorganized Debtors will continue to maintain for corporate
organizational purposes each as described below); and
o result in all holders of Claims and Equity Interests being precluded and
enjoined from asserting against the Reorganized Debtors, or any of their
assets or properties, any other or further Claim or Equity Interest based
on any act or omission, transaction, or other activity of any kind or
nature that occurred before the Effective Date, whether or not the holder
of that Claim or Equity Interest filed a proof of claim or proof of equity
interest.
The effect of these provisions will be that on the Effective
Date, in consideration of the distributions to be made under the Plan, the
Senior Lender Agreements, Senior Subordinated Notes, common stock (except for
certain common stock relating to interdebtor corporate organizational holdings
as described below), stock options, stock-based compensation, any documents and
agreements relating thereto, and all other Claims and Equity Interests will be
cancelled, and all obligations of the Debtors under or in respect of them will
be terminated.
37
For internal corporate organizational purposes, the Plan
provides that all Equity Interests in each of the Debtors other than Holdings
and WINC are to be delivered to such Debtor. Such Debtor will have the right, in
its sole discretion, to cancel or reissue such Equity Interests in accordance
with applicable provisions of the Plan. Each holder of an Equity Interest that
is cancelled pursuant to the Plan will neither receive nor retain any property
or interest in property on account of such Equity Interest. These provisions
will have the effect of allowing Reorganized AMF to dissolve or maintain those
of its direct and indirect subsidiaries as it deems necessary for corporate
organizational purposes.
D. Deemed Consolidation of Debtors
Under the Plan, the Debtors will be deemed consolidated and
treated as a single entity for the following purposes, but only for the
following purposes:
o no distributions will be made under the Plan on account of the
Interdebtor Claims or ownership interests;
o all guaranties by any of the Debtors of the obligations of any other
Debtor arising before the Effective Date will be eliminated so that any
Claim against any Debtor and any guaranty of that Claim executed by any
other Debtor, and any joint and several liability of any of the
Debtors, will be treated as a single obligation of the consolidated
Debtors viewed as a single entity; and
o each and every Claim filed or to be filed in a Reorganization Case of
any of the Debtors will be deemed filed against all of Debtors as a
single entity and will be deemed to be a single Claim against and, to
the extent that Claim is Allowed, a single obligation of the
consolidated Debtors viewed as a single entity.
Except as otherwise provided in the Plan, the deemed
consolidation of the Debtors, however, will not (other than for purposes related
to funding distributions under the Plan and as described above) affect any of
the following:
o the legal and organizational structure of the Reorganized Debtors; or
o pre- or post-Commencement Date guaranties, liens, and security interests
that are required to be maintained:
(a) in connection with executory contracts or
unexpired leases that were entered into during the
Reorganization Cases or that have been or will be
assumed;
(b) under the Plan; or
(c) in connection with any financing entered into by the
Reorganized Debtors on the Effective Date; or
o distributions out of any insurance policies or proceeds of policies.
38
Substantive consolidation is an equitable remedy that the
Bankruptcy Court may be asked to apply in cases that involve affiliated debtors.
As contrasted with procedural consolidation,/1/ substantive consolidation may
affect the substantive rights and obligations of creditors and debtors.
Substantive consolidation involves the pooling and merging of the assets and
liabilities of the affected debtors; all of the debtors in the substantively
consolidated group are treated as if they were a single corporate and economic
entity. The consolidated assets create a single fund from which all claims
against the consolidated debtors are satisfied. Consequently, a creditor of one
of the substantively consolidated debtors is treated as a creditor of the
substantively consolidated group of debtors and issues of individual corporate
ownership of property and individual corporate liability on obligations are
ignored. However, substantive consolidation does not affect the debtors'
separate corporate existence or independent ownership of property for any
purposes other than for making distributions of property under a plan of
reorganization or otherwise as necessary to implement the plan.
Substantive consolidation generally has the effect of, among
other things, eliminating:
o cross-corporate guaranties by one debtor of the obligation of another
debtor in the substantively consolidated group,
o duplicative claims against more than one debtor in the substantively
consolidated group, and
o intercompany claims between the substantively consolidated debtors.
The power to substantively consolidate interrelated
reorganization cases arises from the general equitable powers of a bankruptcy
court set forth in section 105 of the Bankruptcy Code. Within this framework,
the principal factors to which courts have looked to determine the
appropriateness of substantive consolidation include: (i) whether creditors
dealt with the debtor entities as a single economic unit and did not rely on
their separate identities in extending credit, and (ii) whether the affairs of
the debtors are so entangled that the consolidation will benefit all creditors
of the debtors' estates. Additional factors to be considered include: (i) the
presence or absence of consolidated financial statements; (ii) the existence of
inter-company guaranties or loans; (iii) the unity of interest and ownership
between the various corporate entities; (iv) the transfer of assets without
formal observance of corporate formalities; (v) the degree of difficulty in
segregating and ascertaining individual assets and liabilities; (vi) common
directors and/or officers shared by the parents, affiliates and subsidiaries;
(vii) a parent or its affiliates financing one another; and (viii) commingling
of assets and business functions.
The Debtors believe that substantive consolidation of the
Debtors' Estates will facilitate confirmation of the Plan and foster similarity
and fairness of treatment of holders of Claims. Unless consolidation has been
approved by a prior order of the Bankruptcy Court, the Plan will serve as a
motion seeking entry of an order consolidating the Reorganization Cases. Unless
an objection to consolidation is made in writing by any party in interest
affected by the Plan no later than the deadline for the filing of objections to
the Plan, the Consolidation Order may be entered by the Bankruptcy Court. If any
objections are timely filed, a hearing will be scheduled by the Bankruptcy
Court, which hearing may, but need not, coincide with the Confirmation Hearing.
- ------------------------
/1/ Procedural consolidation is the administrative process (contemplated by
Bankruptcy Rule 1015(b)) whereby the proceedings of two or more affiliated
debtors are conducted as part of a single proceeding for the convenience of
the bankruptcy court and parties in interest. Procedural consolidation does
not affect the substantive rights of the debtors or their respective
creditors and interest holders. These Reorganization Cases were procedurally
consolidated by order of the Bankruptcy Court dated July 3, 2001.
E. Corporate Organization of Reorganized AMF and Reorganized Debtors
As discussed in section I.E.2., "Summary of Distributions
Under the Plan" above, the Plan provides that all Equity Interests in Holdings
and WINC will be deemed cancelled as of the Effective Date. This will leave BINC
with no Equity Interest in the Debtors and Reorganized AMF (formerly WINC) as
the ultimate parent of the other Debtors. Additionally, under the Plan the
Debtors will cancel or reissue the Equity Interests of certain Subsidiary
Debtors to simplify their corporate structure.
The following diagram shows in simplified form the effect of
the implementation of the Plan on the corporate hierarchy of BINC, Holdings and
WINC. The other Debtors except for those Debtors that will be dissolved under
the Plan, along with the Non-Debtor Subsidiaries, will remain direct or indirect
subsidiaries of Reorganized AMF. See Exhibit G to this Disclosure Statement for
a list of the Debtors that will be reorganized under the Plan and continue to
exist from and after the Effective Date.
40
Corporate Organization of Pre-Petition and Reorganized Company
Current Post Reorganization
------- -------------------
AMF Bowling, Inc. Prepetition Creditors
("BINC")
(Not a Debtor in the Reorganization
Cases)
|
|
| _ _ _ _ _
| V V V V V
AMF Group Holdings Inc. | | | | |
("AMF Group Holdings") | | | | |
| Reorganized AMF
| (formerly WINC)
| | | | | |
| | | | | |
AMF Bowling Worldwide, Inc. Operating [ ] [ ] [ ] [ ] [ ]
("WINC") Subsidiaries
Debtor and | | | | |
Non-Debtor | | | | |
Operating | | | | |
Subsidiaries [ ] [ ] [ ] [ ] [ ]
Note: Holdings is a holding company that has no employees, conducts no
operations and holds no assets other than its interests in WINC. Certain of the
Subsidiary Debtors are holding companies that similarly have no employees,
conduct no operations and hold no assets other than their interests in other
WINC subsidiaries. Some of these subsidiaries will be dissolved in connection
with the reorganization.
41
F. Market and Trading Information
Reorganized AMF will use commercially reasonable efforts to:
o issue appropriate releases of information and otherwise comply with the
requirements of paragraph (c) of Rule 144 under the Securities Act, and
o conduct informational meetings with potential investors and research
analysts.
WINC does not intend to apply for the listing of the New AMF Common
Stock, the New Warrants or the New AMF Notes on a national securities exchange
or the NASDAQ Stock Market.
G. Dividends
The terms of the Exit Facility and the New Senior Subordinated Note
Indenture will restrict Reorganized AMF's ability to pay dividends, and it is
not anticipated that any cash dividends will be paid on the New AMF Common Stock
for the foreseeable future.
H. Applicability of Federal and Other Securities Laws
- --------------------------------------------------------------------------------
The Issuance and Resale of the New AMF Common Stock, New
Warrants and the New AMF Notes Raise Issues Under
Federal and State Securities Laws.
The issuance and resale of the New AMF Common Stock, New
Warrants and New AMF Notes under the Plan raise certain
securities law issues under the Bankruptcy
Code and federal and state securities laws that are
discussed in this section. The information in this section
should not be considered applicable to all situations or to
all holders of Claims receiving New AMF Common Stock,
New Warrants or New AMF Notes under the Plan. Holders of Claims should
consult their own legal counsel concerning the facts and circumstances
relating to the transfer of the Plan Securities.
- --------------------------------------------------------------------------------
No registration statement will be filed under the Securities
Act or any state securities laws relating to the initial offer and distribution
on the Effective Date under the Plan of the New AMF Common Stock, New Warrants
or New AMF Notes. The Debtors believe that the provisions of section 1145(a)(l)
of the Bankruptcy Code exempt the initial offer and distribution of the Plan
Securities on the Effective Date under the Plan from federal and state
securities registration requirements.
Similarly, no registration statement will be filed under the
Securities Act or any state securities laws relating to the offer and sale of
the New AMF Common Stock in connection with the exercise of the New Warrants.
The Debtors believe that the provisions of section 1145(a)(2) of the Bankruptcy
Code exempt the offer and sale of such New AMF Common Stock in connection with
the exercise of the New Warrants from federal and state securities registration
requirements.
1. Initial Offer and Sale of Securities
Section 1145(a)(1) of the Bankruptcy Code exempts the offer
and sale of securities under a plan of reorganization from registration under
the Securities Act and under state securities laws if three principal
requirements are satisfied:
42
o the securities must be offered and sold "under a plan" of
reorganization and must be securities of the debtors, of an affiliate
"participating in a joint plan" with the debtors or of a successor to
the debtors under the plan;
o the recipients of the securities must hold a prepetition or
administrative expense claim against the debtors or an interest in the
debtors or such affiliate; and
o the securities must be issued entirely in exchange for the recipient's
claim against or interest in the debtors, or "principally" in such
exchange and "partly" for cash or property.
The Debtors believe that the offer and sale of the New AMF
Notes, the New AMF Common Stock, and the New Warrants under the Plan satisfy the
requirements of section 1145(a)(1) of the Bankruptcy Code and are therefore
exempt from registration under the Securities Act and state securities laws.
Section 1145(a)(2) of the Bankruptcy Code exempts the offer of
a security through the offer and sale of any warrant, option or right to
subscribe that was offered and sold under a plan of reorganization in accordance
with section 1145(a)(1) of the Bankruptcy Code and the sale of a security upon
the exercise of such a warrant, option or right to subscribe. The Debtors
believe that the offer and sale of the New AMF Common Stock in connection with
exercises of the New Warrants satisfy the requirements of section 1145(a)(2) of
the Bankruptcy Code and are therefore exempt from registration under the
Securities Act and state securities laws.
In connection with the confirmation of the Plan, the Debtors
will seek from the Bankruptcy Court an order to the effect that:
o the offer and sale of the New AMF Common Stock, New Warrants and New AMF
Notes under the Plan are exempt from registration under the Securities
Act and state securities laws under section 1145(a)(1) of the Bankruptcy
Code; and
o the offer and sale of the New AMF Common Stock to be purchased upon
exercise of the New Warrants are exempt from registration under the
Securities Act and state securities laws under section 1145(a)(2) of the
Bankruptcy Code.
2. Subsequent Transfers Under Federal Securities Laws
The New AMF Common Stock, New Warrants and New AMF Notes
distributed under the Plan will not be "restricted securities" within the
meaning of Rule 144 under the Securities Act.
In general, all resales and subsequent transactions involving
the New AMF Common Stock, New Warrants and New AMF Notes offered and sold under
the Plan or upon the exercise of the New Warrants will be exempt from
registration under the Securities Act under section 4(1) of the Securities Act,
unless the holder is deemed to be an "underwriter" with respect to such
securities, an "affiliate" of the issuer of such securities or a "dealer."
Section 1145(b)(1) of the Bankruptcy Code defines four types of "underwriters":
o persons who purchase a claim against, an interest in, or a claim for
administrative expense against the Debtors with a view to distributing
any security received or to be received in exchange for such a claim or
interest ("accumulators");
43
o persons who offer to sell securities offered or sold under a plan for
the holders of such securities ("distributors");
o persons who offer to buy securities offered or sold under a plan from
the holders of the securities, if the offer to buy is (a) with a view to
distributing such securities and (b) made under an agreement in
connection with the plan or with the offer or sale of securities under
the plan; and
o a person who is an "issuer" with respect to the securities, as the term
"issuer" is defined in section 2(11) of the Securities Act.
Under section 2(11) of the Securities Act, an "issuer"
includes any "affiliate" of the issuer, which means any person directly or
indirectly controlling or, controlled by the issuer or any person under direct
or indirect common control with the issuer. Under section 2(12) of the
Securities Act, a "dealer" is any person who engages either for all or part of
his or her time, directly or indirectly, as agent, broker or principal, in the
business of offering, buying, selling or otherwise dealing or trading in
securities issued by another person. Whether or not any particular person would
be deemed to be an "underwriter" or an "affiliate" with respect to any security
to be issued under the Plan, or would be deemed a "dealer", would depend on
various facts and circumstances applicable to that person. Accordingly, the
Debtors express no view as to whether any person would be an "underwriter" or an
"affiliate" with respect to any security to be issued under the Plan or would be
a "dealer."
In connection with prior bankruptcy cases, the staff of the
Commission has taken the position that resales by accumulators and distributors
of securities distributed under a plan of reorganization are exempt from the
registration under the Securities Act if effected in "ordinary trading
transactions." The staff of the Commission has indicated in this context that a
transaction may be considered an "ordinary trading transaction" if it is made on
an exchange or in the over-the-counter market at a time when the issuer of the
security is a reporting company under the Securities Exchange Act of 1934 (the
"Exchange Act") and does not involve any of the following factors:
o (a) concerted action by the recipients of securities issued under a plan
in connection with the sale of such securities, or (b) concerted action
by distributors on behalf of one or more such recipients in connection
with such sales, or (c) both;
o use of informational documents concerning the offering of the securities
prepared or used to assist in the resale of such securities, other than
a disclosure statement and supplements thereto and documents filed with
the Commission under the Exchange Act; or
o special compensation to brokers and dealers in connection with the sale
of such securities designed as a special incentive to the resale of such
securities (other than the compensation that would be paid under arms'
length negotiations between a seller and a broker or dealer each acting
unilaterally, and not greater than the compensation that would be paid
for a routine similar-sized sale of similar securities of a similar
issuer).
The views of the Commission on these matters have not been
sought by the Debtors and, therefore, no assurance can be given regarding the
proper application of the "ordinary trading transaction" exemption described
above. Any person intending to rely on such exemption is urged to consult his or
her own counsel as to the applicability thereof to his or her circumstances.
44
In addition, Rule 144 provides an exemption from registration
under the Securities Act for certain limited public resales of securities by
"affiliates" of the issuer of such securities. Rule 144 allows a holder of
securities that is an affiliate of the issuer of such securities to sell,
without registration, within any three month period a number of shares of such
securities that does not exceed the greater of one percent of the number of
outstanding securities in question or the average weekly trading volume in the
securities in question during the four calendar weeks preceding the date on
which notice of such sale was filed under Rule 144, subject to the satisfaction
of certain other requirements of Rule 144 regarding the manner of sale, notice
requirements and the availability of current public information regarding the
issuer.
Under the Registration Rights Agreement, the holders of ___
percent or more of New AMF Common Stock as of the Effective Date will be
entitled, under certain circumstances, to require Reorganized AMF to register
the resale of their New AMF Common Stock under the Securities Act. However, no
registration rights will be provided with respect to the New Warrants or the New
AMF Notes or to holders of New AMF Common Stock other than these holders. See
section II.D., "Registration Rights Agreement."
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The New AMF Common Stock, New Warrants and New AMF Notes may not be freely
tradable under U.S. Securities Laws
Given the complex nature of the question of whether a
particular person may be an underwriter, the Debtors make no
representations concerning the right of
any person to trade in the New AMF Common Stock, New Warrants or New AMF Notes
to be distributed under the Plan. The Debtors recommend that any person that
receives New AMF Common Stock, New Warrants or New AMF Notes
under the Plan consult his or her own counsel concerning
whether they may freely trade such
securities.
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3. Subsequent Transfers Under State Law
The state securities laws generally provide registration
exemptions for subsequent transfers by a bona fide owner for his or her own
account and subsequent transfers to institutional or accredited investors. Such
exemptions are generally expected to be available for subsequent transfers of
New AMF Common Stock, the New AMF Notes and the New Warrants.
Any person intending to rely on these exemptions is urged to
consult his or her own counsel as to their applicability to his or her
circumstances.
I. Certain Transactions by Stockbrokers
Under section 1145(a)(4) of the Bankruptcy Code, stockbrokers
are required to deliver a copy of this Disclosure Statement (and any
supplements, if ordered by the Bankruptcy Court) at or before the time of
delivery of securities issued under the Plan to their customers for the first 40
days after the Effective Date. This requirement specifically applies to trading
and other after-market transactions in the securities.
45
J. Fractional Shares--Distribution of New AMF Common Stock and New
Warrants
No fractional shares of New AMF Common Stock or fractional New
Warrants or cash in lieu of fractional shares or fractional New Warrants will be
distributed under the Plan. In connection with distributions under the Plan,
fractional shares of New AMF Common Stock or fractional New Warrants will be
rounded down to the next whole number or zero, as applicable. Fractional shares
or New Warrants that are not distributed because of this rounding will be
returned to Reorganized AMF and cancelled.
K. Treatment of Claims and Equity Interests
1. Generally
The Plan incorporates the compromise and settlements of
certain issues that were resolved through negotiations among the Debtors and the
Senior Lender Steering Committee. In connection with these negotiations, the
holders of Senior Lender Claims have agreed that certain distributions to which
they would otherwise be entitled will be made available to the holders of Senior
Subordinated Notes and Allowed Unsecured Claims to promote confirmation of the
Plan.
Holders of Claims against or Equity Interests in the Debtors
will receive the treatment under the Plan on account of such Claims or Equity
Interests described in the table and discussion in section I.E., "Summary of
Distributions to Be Made Under the Plan".
2. Setoffs
Except with respect to the Senior Lender Claims, the Debtors
and the Reorganized Debtors may, but will not be required to, set off against
any Claim (for purposes of determining the Allowed amount of such Claim on which
distribution will be made), any claims of any nature whatsoever that any of the
Debtors, the Estates or the Reorganized Debtors may have against the holder of
such Claim, but neither the failure to do so nor the allowance of any Claim will
constitute a waiver or release by the Debtors or Reorganized Debtors of any such
Claim any of the Debtors, the Estates, or the Reorganized Debtors may have
against the holder of such Claim.
L. Conditions to Confirmation and Consummation
Under section 9.1 of the Plan, the Plan may not be confirmed
unless the Debtors have obtained a binding commitment for the Exit Facility.
The Debtors may waive the above condition at any time without
leave of or notice to the Bankruptcy Court and without any formal action other
than proceeding with Confirmation of the Plan, subject to the consent of the
Senior Lender Steering Committee, which consent shall not be unreasonably
withheld.
Under section 10.1 of the Plan, the Plan may not be
consummated unless:
o the Confirmation Order has become a Final Order;
o the Consolidation Order has been entered;
o the Exit Facility has been executed and delivered in accordance with
the applicable requirements under the Plan;
46
o the Reorganized Debtors have sufficient Cash on hand
and/or a financing commitment to make timely distributions
of cash required under the Plan;
o the Plan Documents to be entered into as of the Effective Date have
been executed and delivered.
Under section 10.2 of the Plan, the Debtors may waive the
requirement that the Confirmation Order become a Final Order and may proceed
with consummation of the Plan without leave of or notice to the Bankruptcy Court
and without any formal action other than proceeding with consummation of the
Plan, subject to the consent of the Senior Lender Steering Committee, which
consent shall not be unreasonably withheld. If the Debtors perform such a waiver
and consummation, the Debtors' waiver of this condition will benefit from the
"mootness doctrine", and the act of consummation of the Plan will foreclose any
ability to challenge the Plan in court. If the Debtors do not expressly waive
this condition, the failure to satisfy or waive this condition may be asserted
by the Debtors regardless of the circumstances that give rise to the failure of
the condition to be satisfied (including, without limitation, any act, action,
failure to act, or inaction by the Debtors). Furthermore, the failure of the
Debtors to assert the non-satisfaction of this condition will not be deemed a
waiver of any other rights under the Plan, and each such right will be deemed an
ongoing right that may be asserted or waived (as set forth in the Plan) at any
time or from time to time.
M. Treatment of Officers and Directors
Under section 5.7 of the Plan, on the Effective Date, the
authority, power and incumbency of the persons then acting as directors of WINC
will be terminated and the new directors that are selected under the Plan will
assume their offices as the Board of Directors of Reorganized AMF and will
assume responsibility for the management, control and operations of Reorganized
AMF.
Section 8.5 of the Plan provides that any obligations of the
Debtors, under their corporate charters and bylaws or agreements entered into
any time prior to the Commencement Date, to indemnify a Representative
(including members of the Boards of Directors of the Debtors prior to
implementation of the Plan) with respect to all present and future actions,
suits, and proceedings against a Debtor or a Representative, based upon any act
or omission for or on behalf of a Debtor, will be treated as executory contracts
under the Bankruptcy Code and assumed by the Reorganized Debtors. These
indemnification obligations will not be discharged or impaired by confirmation
or consummation of the Plan, but will continue as obligations of the respective
Reorganized Debtors. These provisions have the effect of continuing certain
pre-bankruptcy protections against liability provided by the Debtors to
Representatives of the Debtors who incurred liability for certain acts while
working on behalf of the Debtors. As discussed in Section III.O., "Release of
Claims Against Representatives under the Plan" below under the Plan the
Reorganized Debtors will also release certain potential claims against the
officers and directors of the Debtors. Additionally, as described more fully
below, the Plan also provides for a mandatory release by the Senior Lenders of
certain Claims against non-Debtor subsidiaries and affiliates who are obligors
under any of the Senior Lender Agreements.
47
The Plan provides that on the Effective Date, the Board of
Directors of Reorganized AMF will be composed of seven directors as follows:
o four directors selected by the Senior Lender Steering Committee on behalf
of the holders of the Senior Lender Claims; and
o the Chief Executive and Chief Financial Officers of Reorganized AMF; and
o one director selected by the Creditors' Committee who is reasonably
satisfactory to the Debtors and the Senior Lenders.
The Senior Lender Steering Committee has nominated _________,
________, _________ and _________, and the Creditors' Committee has nominated
_________, to serve on the Board of Directors. If one or more nominees is unable
or unwilling to serve on the Board of Directors, Reorganized AMF will have the
right to nominate one or more persons to serve in place of those nominees.
The initial Board of Directors of Reorganized AMF will serve
until the first annual meeting of the holders of the New AMF Common Stock.
Thereafter, the Board of Directors of Reorganized AMF will be elected in
accordance with the Amended Certificate of Incorporation and Amended Bylaws and
applicable nonbankruptcy law.
The Board of Directors or other internal governing body, as
applicable, of each Reorganized Debtor other than Reorganized AMF will continue
as in effect immediately prior to the Effective Date until removed or replaced
under applicable law or in accordance with that Reorganized Debtor's corporate
governance procedures. On the Effective Date, the officers of the Reorganized
Debtors will be those officers in office immediately prior to the Effective
Date.
N. Employee Incentive Program
Under section 5.4 of the Plan, as of the Effective Date,
Reorganized AMF will implement the New Management Incentive Plan as a management
retention plan.
Under the New Management Incentive Plan, certain members of
Reorganized AMF's senior management and certain other employees will receive the
New Management Options which consist, in the aggregate, of:
o an initial grant, on the Effective Date, of options to purchase six
percent of the fully diluted New AMF Common Stock, after the exercise of
such options and the New Warrants, at a price of $21.19 per share, based
on an assumed enterprise value of Reorganized AMF of $665 million and
assuming the Reorganized Debtors will have $453 million of funded
indebtedness outstanding upon consummation of the Plan; and
o additional grants of options on each of the second and third anniversaries
of the Effective Date, in amounts to be determined by the Board of
Directors of Reorganized AMF, to purchase an aggregate amount of shares of
New AMF Common Stock issued and outstanding under the Plan as of those
dates equal to six percent of the fully diluted New AMF Common Stock at a
price to be determined by the Board of Directors.
48
The New Management Options will vest ratably on each of the
first three anniversaries of the date of the grant of the options and will
expire seven years after the date of their grant. Any issuance of New AMF Common
Stock or exercise of New Management Options distributed under the New Management
Incentive Plan will equally and ratably dilute the percentage ownership of all
holders of the New AMF Common Stock. Except as provided above, and subject to
the terms of the New Management Incentive Plan, the Board of Directors, or a
committee appointed by the Board of Directors, will have sole authority, in its
absolute discretion, to administer the New Management Incentive Plan, such
administrative duties including, but not limited to, the authority to determine
which senior managers and other employees receive option grants, when and how
options will be granted, and the number of shares of New AMF Common Stock
subject to such grants.
O. Release of Claims Against Representatives Under the Plan
Under section 11 of the Plan, as of the Effective Date:
o the Debtors and the Debtors' bankruptcy estates will waive, release
and discharge all of their Representatives from any Claim arising
through the Confirmation Date related to his or her acts or omissions
to act (including, but not limited to, any Claims arising out of any
alleged fiduciary or other duty); and
o to the full extent permitted by applicable law, each holder of a Claim
(whether or not Allowed) against or Equity Interest in a Debtor will be
enjoined from commencing or continuing any action, employment of
process or act to collect, offset or recover any Claim against a
Representative arising from the beginning of time through the
Confirmation Date related to such Representative's acts or omissions to
act (including, but not limited to, any claims arising out of any
alleged fiduciary or other duty).
P. No Recourse With Respect to Disputed Claims
Notwithstanding that the Allowed amount of any particular
Disputed Claim is reconsidered under the applicable provisions of the Bankruptcy
Code and Bankruptcy Rules or is Allowed in an amount for which there is
insufficient value to provide a recovery equal to that received by other holders
of Allowed Claims in the respective Class after application of the payment
priorities established by the Plan, no Claim holder will have recourse against
the Disbursing Agent, the Debtors, the Creditors' Committee, the Senior Lenders,
the Reorganized Debtors, or any of their professional consultants, officers,
directors or members or their successors or assigns, or any of their property.
However, nothing in the Plan will modify any right of a holder of a Claim under
section 502(j) of the Bankruptcy Code.
The Bankruptcy Court's entry of the estimation order may limit
the distribution to be made on individual Disputed Claims, regardless of the
amount finally Allowed on account of those Disputed Claims.
Q. Injunction
Section 11.8 of the Plan provides that, except as otherwise
provided in the Plan or the Confirmation Order, as of the Confirmation Date, but
subject to the implementation of the Plan on the Effective Date, all persons who
have held, hold or may hold Claims against or Equity Interests in any of the
Debtors or the Estates are, with respect to any such Claims or Equity Interests,
permanently enjoined from and after the Confirmation Date from:
49
o commencing, conducting or continuing in any manner, directly or indirectly,
any suit, action or other proceeding of any kind (including, without
limitation, any proceeding in a judicial, arbitral, administrative or
other forum) against or affecting the Debtors, any of their property, or
any direct or indirect transferee of any property of, or direct or indirect
successor in interest to, any of the foregoing Persons, or any property
of any such transferee or successor;
o enforcing, levying, attaching (including, without limitation, any
pre-judgment attachment), collecting or otherwise recovering by any manner
or means, whether directly or indirectly, any judgment, award, decree or
order against the Debtors, any of their property, or any direct or indirect
transferee of any property of, or direct or indirect successor in interest
to, any of the foregoing Persons, or any property of any such transferee
or successor;
o creating, perfecting or otherwise enforcing in any manner, directly or
indirectly, any encumbrance of any kind against the Debtors or against any
of their property, or any direct or indirect transferee of any property of,
or successor in interest to, any of the foregoing Persons;
o asserting any right of setoff, subrogation, or recoupment of any kind,
directly or indirectly, against any obligation due to the Debtors or
against any of their property, or any direct or indirect transferee of any
property of, or successor in interest to, any of the foregoing Persons; and
o acting or proceeding in any manner, in any place whatsoever, that does not
conform to or comply with the provisions of the Plan to the fullest extent
permitted by applicable law.
R. Release of Liens
Except as otherwise specifically provided in or contemplated
by the Plan or in any contract, instrument or other agreement or document
created in connection with the Plan, (i) each holder of: (a) any DIP Lender
Claim, Other Secured Claim or Senior Lender Claim; (b) any Claim that is
purportedly secured; and/or (c) any judgment, personal property or ad valorem
tax, mechanics' or similar lien Claim, in each case regardless of whether such
Claim is an Allowed Claim, shall, on or immediately before the Effective Date
and regardless of whether such Claim has been scheduled or proof of such Claim
has been filed: (y) turn over and release to the Estates or the Reorganized
Debtors, as the case may be, any and all property of a Debtor or Estate that
secures or purportedly secures such Claim, or such lien and/or Claim shall
automatically, and without further action by the Debtors, the Estates or the
Reorganized Debtors, be deemed released; and (z) execute such documents and
instruments as the Disbursing Agent or the Reorganized Debtors, as the case may
be, require to evidence such Claim holder's release of such property or lien,
and if such holder refuses to execute appropriate documents or instruments, the
Debtors, the Estates or the Reorganized Debtors (as applicable) may, in their
discretion, file a copy of the Confirmation Order in the appropriate recording
office, which shall serve to release any Claim holder's rights in such property;
and (ii) on the Effective Date, all right, title and interest in such property
shall revert or be transferred to the respective Reorganized Debtors or the
Disbursing Agent, as applicable, free and clear of all Claims and interests,
including, without limitation, liens, escrows, charges, pledges, encumbrances
and/or security interests of any kind.
50
S. Discharge of Debtors
Under section 11.3 of the Plan, on the Effective Date, in
consideration of the distributions made under the Plan, and except as otherwise
expressly provided in the Plan, each holder (as well as any trustees and agents
on behalf of each holder) of a Claim or Equity Interest, and any affiliate of
such holder, will be:
o deemed to have forever waived, released, and discharged the Debtors of
and from any and all Claims, Equity Interests, rights, and liabilities
that arose prior to the Effective Date, to the fullest extent permitted
by section 1141 of the Bankruptcy Code; and
o forever precluded and enjoined from prosecuting or asserting any such
discharged Claim against, or terminated Equity Interest in, the Debtors
or Reorganized Debtors, pursuant to sections 105, 524 and 1141 of the
Bankruptcy Code.
T. Treatment of Executory Contracts and Unexpired Leases
1. General Treatment.
All executory contracts and unexpired leases to which any of
the Debtors is a party will be rejected by the implementation of the Plan,
except for any executory contracts or unexpired leases that (i) have been
assumed or rejected pursuant to a Final Order of the Bankruptcy Court, (ii) are
designated, specifically or by category, as a contract or lease to be assumed on
the Schedule of Assumed Contracts and Leases contained in the Plan Supplement,
as that schedule may be amended from time to time whether before or after the
Effective Date to include additional contracts and agreements, or (iii) are the
subject of a separate motion to assume or reject filed by the Debtors prior to
the Effective Date under section 365 of the Bankruptcy Code.
For purposes of the Plan, each executory contract and
unexpired lease that relates to the use or occupancy of real property, whether
(i) listed on the Schedule of Assumed Contracts and Leases, (ii) previously
assumed or rejected pursuant to a Final Order of the Bankruptcy Court, or (iii)
rejected under the Plan, will be deemed to include (a) modifications,
amendments, supplements, restatements, or other agreements made directly or
indirectly by any agreement, instrument, or other document that in any manner
affects that executory contract or unexpired lease, and (b) executory contracts
or unexpired leases appurtenant to the premises, including all easements,
licenses, permits, rights, privileges, immunities, options, rights of first
refusal, powers, uses, usufructs, reciprocal easement agreements, vault, tunnel
or bridge agreements or franchises, and any other interests in real estate or
rights in rem relating to such premises to the extent any of the foregoing are
executory contracts or unexpired leases, unless any of those agreements are
otherwise specifically assumed or rejected.
The executory contracts and unexpired leases on the Schedule
of Assumed Contracts and Leases will be assumed under the Plan by the respective
Debtors as indicated that Schedule. To the extent any executory contract or
unexpired lease on the Schedule of Assumed Contracts and Leases is property of
an Estate of a Debtor that is not a Reorganized Debtor, the Debtors will have
the right under the Plan to designate as to each such executory contract or
unexpired lease the Reorganized Debtor in which such executory contact or
unexpired lease vests. Further, except as may otherwise be ordered by the
Bankruptcy Court, the Debtors will have the right to cause any assumed executory
contract or unexpired lease to vest in the Reorganized Debtor designated for
such purpose by the Debtors.
51
2. Cure of Defaults.
Except to the extent that different treatment has been agreed
to by the non-debtor party or parties to any executory contract or unexpired
lease to be assumed pursuant to the Schedule of Assumed Contracts and Leases,
the Debtors will, under sections 1123(a)(5)(G) and 1123(b)(2) of the Bankruptcy
Code and consistent with the requirements of section 365 of the Bankruptcy Code,
within thirty (30) days of the Effective Date, file and serve on parties to
executory contracts or unexpired leases to be assumed and other parties in
interest a pleading with the Bankruptcy Court listing the cure amounts of all
executory contracts or unexpired leases to be assumed. The parties to those
executory contracts or unexpired leases to be assumed by the Reorganized Debtors
will have fifteen (15) days from the date of service to object to the cure
amounts listed by the Debtors. If an objection is filed with respect to an
executory contract or unexpired lease, the Bankruptcy Court will hold a hearing
to determine the amount of the disputed cure amount. Notwithstanding the
foregoing, at all times through the date that is five (5) business days after
the Bankruptcy Court enters an order resolving and fixing the amount of a
disputed cure amount, the Debtors will have the right to reject that executory
contract or unexpired lease.
3. Rejection Claims.
Except as otherwise ordered by the Bankruptcy Court, if the
rejection of an executory contract or unexpired lease by any of the Debtors
under the Plan results in damages to the other party or parties to that contract
or lease, the Plan provides that a Claim for those damages will be forever
barred and not be enforceable against the Debtors, or their respective
properties or interests in property as agents, successors, or assigns, unless a
proof of claim has been filed with the Bankruptcy Court and served upon counsel
for the Debtors on or before the Bar Date.
4. Employment Agreement for the Chief Executive Officer of Reorganized
AMF.
Under the Plan, Reorganized AMF will also enter into the New
Employment Agreement, which will be substantially in the form set forth in the
Plan Supplement.
U. Exculpation
Under section 11.6 of the Plan, except with respect to
obligations under the Plan and the Plan Documents, neither the Debtors, the
Disbursing Agent, the Senior Lender Steering Committee, the Creditors'
Committee, nor any of their respective members, officers, directors, employees,
agents, or professionals, solely in their capacity as such, will have or incur
any liability to any holder of any Claim or Equity Interest for any act or
omission in connection with, or arising out of:
o the Reorganization Cases;
o the confirmation of the Plan;
o the consummation of the Plan; or
o the administration of the Plan or property to be distributed under the
Plan;
except for willful misconduct, recklessness or gross negligence.
52
IV. RISK FACTORS
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Important Risks to Be Considered
Holders of Claims against the Debtors should read and
consider carefully the following risk factors and the other
information in this Disclosure Statement, the Plan, the Plan
Supplement and the other documents delivered or incorporated
by reference in this Disclosure Statement and the Plan, before
voting to accept or reject the Plan.
These risk factors should not, however, be regarded
as constituting the only risks involved in connection with the
Plan and its implementation. Additional risks and other
information about WINC and the other Debtors can be found in
WINC's Form 10-K for the fiscal year ended December 31, 2000,
its Form 10-Q's for the quarters ended March 31, 2001 and June
30, 2001 and its other filings from time to time with the
Securities and Exchange Commission, which are incorporated
into this Disclosure Statement by reference. Copies of these
SEC filings may be obtained over the Internet at www.sec.gov.
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A. Reorganized AMF may not be able to achieve its projected financial results.
The Debtors cannot assure you that the Reorganized Debtors
will be able to achieve the revenue or cash flow they have relied on to project
their future business prospects or otherwise meet their projected financial
results. If the Reorganized Debtors do not achieve these projected revenue or
cash flow levels, they may lack sufficient liquidity to continue operating as
planned after the Effective Date. Failure to meet specified financial results
would be likely to result in an event of default under any Exit Facility, which
would prevent the Debtors' from borrowing additional funds thereunder and
further reduce the Debtors' liquidity.
The Debtors' financial projections represent management's view
today based on current known facts as to the Reorganized Debtors' projected
operations. However, while management believes the assumptions underlying its
projections are reasonable, these projections do not attempt to demonstrate the
viability of the business in a "worst case" environment. See section VI.B.,
"Financial Projections and Valuation Analysis" and Exhibit E.
1. The Debtors' bowling centers business faces intense
competition from other leisure activities and, in
particular, has experienced declines in the number of
games bowled.
Bowling is both a competitive sport and a recreational
entertainment activity and faces competition from numerous alternative leisure
activities. The success of the Debtors' bowling centers business is subject to
continued interest in bowling, the availability and affordability of other
recreational and entertainment alternatives, the amount of customer leisure
time, and other social and economic factors over which the Debtors have no
control.
53
The Debtors' bowling center business has experienced and is
continuing to experience a decline in the number of games bowled per lane per
day (also known as "lineage"). This decline has been primarily caused by a
decrease in the number of league bowlers. While more people are bowling at the
Debtors' bowling centers, they are bowling less often. While the Debtors are
seeking to improve lineage at the bowling centers and offset lineage declines
with measures to reduce costs and increase revenues per game, they cannot assure
you that they will be successful or that lineage will not further decrease.
The U.S. bowling center industry is highly fragmented. It
consists of two relatively large bowling center operators, the Debtors (which
together had approximately ___ U.S. centers as of August __, 2001) and Brunswick
Corporation ("Brunswick") (which had approximately ___ U.S. centers, as of
___________), three medium-sized chains, which together account for
approximately ___ bowling centers, and approximately 5,000 bowling centers owned
by single-center and small-chain operators, which typically own four or fewer
centers. The top five operators (including the Debtors) account for
approximately 10 percent of the total number of U.S. bowling centers.
The international bowling center industry is also highly
fragmented. There are few chain operators in any one country and a large number
of single-center operators.
2. The bankruptcy filing may further disrupt the Debtors' operations.
The impact, if any, that the Reorganization Cases may have on
the operation of Reorganized AMF cannot be accurately predicted or quantified.
The Debtors believe the Reorganization Cases and consummation of the Plan in an
expeditious manner will have a minimal further adverse impact on relationships
with customers, employees and suppliers, especially in view of the fact that the
Plan is supported by the Senior Lender Steering Committee. If confirmation and
consummation of the Plan do not occur expeditiously, the Reorganization Cases
could further adversely affect the Debtors' relationships with its customers,
employees and suppliers.
However, even an expedited chapter 11 case could have a
detrimental impact on future sales and patronage due to the possibility that the
Reorganization Cases may create a negative image of the Debtors in the eyes of
their customers and suppliers. Notwithstanding the support offered by the Senior
Lender Steering Committee for the Plan, the Debtors' commencement of the
Reorganization Cases could further adversely affect the Debtors' relationship
with their customers, suppliers and employees. Prolonged Reorganization Cases
may make it more difficult for the Debtors to retain and attract management and
other key personnel and would require senior management to spend an excessive
amount of time and effort dealing with the Debtors' financial problems instead
of focusing on the operation of their businesses.
3. The Debtors face global competition in their bowling products business.
The Debtors and Brunswick are the two largest manufacturers of
bowling center equipment and are the only full-line manufacturers of bowling
equipment and supplies that compete globally. The Debtors also compete with
smaller, focused companies in certain product lines. Management estimates that
the Debtors account for approximately 40 percent of the worldwide installed base
of bowling center equipment.
The international operations of the Debtors and their
Non-Debtor Subsidiaries are subject to the usual risks inherent in operating
abroad, including, but not limited to, currency exchange rate fluctuations,
restrictive laws, tariffs, import and export duties and quotas, foreign customs,
value added taxes, difficulty in obtaining distribution and support for
products, the laws and policies of the United States affecting trade,
international investment and loans, and foreign tax law changes. Furthermore, in
recent years the Debtors have experienced price pressure and loss of market
share in connection with the growth of lower cost, lower quality bowling
products manufactured in China. The Debtors expect the trend toward lower cost
products to continue, especially in East Asian countries.
54
Demand for new center packages remains substantially below the
peak levels achieved by the Debtors and their Non-Debtor Subsidiaries during
1997. Management believes this is the result of several factors, including: (i)
economic difficulties in the Asia Pacific region; (ii) the failure of an
alternative international market to develop the strong demand experienced in
Asia Pacific in the early and mid-1990's; (iii) the limited availability of
financing for customers seeking to build new centers; and (iv) the uncertainties
raised by the Debtors' restructuring, including the timing and likelihood of the
Debtors' emergence from chapter 11, their ability to satisfy contractual
obligations on time and their ability to continue operating in the ordinary
course.
B. The Debtors have had significant net losses and anticipate future losses
through the year ending December 31, 2003.
The Debtors have reported net losses since 1996. Even if the
Reorganized Debtors achieve the results described in the projections included in
this Disclosure Statement, as a result of their significant interest expense and
depreciation and amortization expense, they expect to have net losses until the
year ending December 31, 2003. Additionally, the Debtors most recent financial
results are below the financial results achieved by the Debtors to a comparable
period in their last fiscal year.
C. The Reorganized Debtors may not be able to meet their post-reorganization
debt obligations, operating expenses, working capital and other capital
expenditures.
The Debtors are currently highly leveraged. Reorganized AMF
will be substantially less leveraged; however, the Debtors cannot assure you
that the operating cash flow of the Reorganized Debtors will be adequate to pay
the principal and interest payments under their post-reorganization indebtedness
when due, as well as to fund all capital expenditures contemplated in the
cash-flow projections.
The Debtors believe that the implementation of their business
strategy is crucial to their future financial viability and the ability to
generate the cash flow necessary to pay principal and interest relating to the
Exit Facility and the New AMF Notes and their post-reorganization working
capital and capital expenditure needs.
Important provisions of the Debtors' business strategy for
their bowling centers business include:
o improved training for center and facility managers;
o enhanced incentive-based compensation for center managers and key staff to
attract better managers and reduce turnover;
o more effective marketing programs; and
o implementation of cost reduction initiatives, such as improved payroll cost
management through better labor scheduling and implementation of an
automated, centralized purchasing program.
55
Important provisions of the Debtors' business strategy for
their bowling products business include:
o reorganization of the business to decrease costs and increase focus on key
product lines and customer service;
o consolidation of country-based sales offices and warehouses;
o implementation of working capital management programs; and
o improvement of the accuracy and completeness of shipments through better
order fulfillment processes.
Although the Debtors believe their business strategy will help
improve their financial viability and their cash flow, the Debtors cannot assure
you that the financial resources available under the Plan will be sufficient to
achieve the financial projections included in their business plan. Moreover, the
Debtors cannot assure you that the new Board of Directors will share
management's view that the business strategy described above presents the best
opportunity for Reorganized AMF's financial success.
D. The Reorganized Debtors may not have sufficient cash flow to repay existing
debt or have access to sufficient financing to refinance such debt at or
prior to maturity.
As of the Effective Date, the Reorganized Debtors expect to
have borrowings of approximately $300 million under the Exit Facility and an
additional $150 million through the issuance of the New AMF Notes. It is
expected that the Exit Facility will mature no later than six years from the
Effective Date. The New AMF Notes will mature six years and six months after the
Effective Date. Prior to the maturity of the Exit Facility and the New AMF
Notes, the Reorganized Debtors may use excess cash flow from operations, if any,
to repay such indebtedness. However, excess cash flow from operations may be
insufficient to fully repay the Exit Facility and/or the AMF Notes prior to or
at their respective maturity dates. As a result, the Reorganized Debtors would
have to rely on external financing sources and/or a refinancing of the Exit
Facility and/or the New AMF Notes. There can be no assurance that the
Reorganized Debtors will be able to refinance this indebtedness.
E. The terms of the Exit Facility and New Senior Subordinated Note Indenture
may restrict Reorganized AMF's ability to fund its working capital
requirements.
The Reorganized Debtors' businesses are expected to require
certain amounts of working capital. While the Reorganized Debtors' Projections
assume that sufficient funds to meet their working capital needs for the
foreseeable future will be available from the proceeds of the Exit Facility and
the cash generated by the businesses of Reorganized Debtors, the ability of the
Reorganized Debtors to gain access to additional capital, if needed, cannot be
assured, particularly in view of competitive factors, industry conditions and
the terms of the Exit Facility and the New Senior Subordinated Note Indenture.
The Debtors expect that the Exit Facility will contain
restrictive financial and operating covenants and prohibitions, including
provisions that will limit Reorganized AMF's ability to make capital
expenditures and pay cash dividends and make other distributions to holders of
New AMF Common Stock. Restrictions on capital investment are expected to be more
restrictive if Reorganized AMF's cash flow is lower than projected. As noted
above, failure to make necessary capital expenditures could have an adverse
effect on Reorganized AMF's ability to remain competitive.
56
F. Reorganized AMF may not be able to comply with the other financial
covenants contained in the Exit Facility and New Senior Subordinated Note
Indenture.
The Debtors cannot assure you that Reorganized AMF will be
able to achieve or maintain the financial performance tests expected to be
contained in the Exit Facility and the New Senior Subordinated Note Indenture.
Failure to meet these financial tests or other covenants could result in a
default under the Exit Facility and the New Senior Subordinated Note Indenture.
If any default were not remedied within the applicable grace period (if any) the
lenders under the Exit Facility and the New Senior Subordinated Note Indenture
would be entitled to declare the amounts outstanding thereunder due and payable,
accelerate the payment of all such amounts and the lenders under the Exit
Facility would be entitled to foreclose upon all of the tangible and intangible
assets of Reorganized AMF.
G. The Debtors may not be able to secure their ordinary course trade terms.
If Reorganized AMF is not able to obtain ordinary trade terms
from its suppliers, Reorganized AMF's cash flow may be negatively impacted.
Prior to the Commencement Date, certain important suppliers altered a number of
ordinary trade terms, including shortening the length of time required to pay
for goods and services and the imposition of cash deposit or letter of credit
requirements. The Debtors cannot assure you that their suppliers will not impose
further restrictive pricing and trade terms and policies in the future.
H. It is unlikely that a public trading market for the Plan Securities will
develop in the foreseeable future and the Plan Securities may be illiquid
or experience significant price volatility.
The Debtors cannot assure you that a market will develop for
the New AMF Common Stock, the New Warrants or the New AMF Notes issued under the
Plan. Reorganized AMF does not expect to have the New AMF Common Stock, the New
Warrants or the New AMF Notes listed on a national securities exchange or the
NASDAQ Stock Market. Even if such securities are subsequently listed, the
Debtors cannot assure you that an active market for such securities will develop
or, if any such market does develop, that it will continue to exist, or as to
the degree of price volatility in any such market that does develop.
I. The estimated valuation of Reorganized AMF and the Plan Securities, and the
estimated recoveries to holders of Claims, is not intended to represent the
trading values of the Plan Securities.
The estimated valuation of Reorganized AMF used in this
Disclosure Statement is based on commonly accepted valuation analysis and is not
intended to represent the trading values of Reorganized AMF's securities in
public or private markets. The estimated recoveries to Classes 2, 4, 5 and 6 are
based on this theoretical valuation analysis. This valuation analysis is based
on numerous assumptions, (the realization of many of which is beyond the control
of Reorganized AMF), including: (i) Reorganized AMF's ability to meet the
financial projections included with this Disclosure Statement; (ii) Reorganized
AMF's ability to maintain sufficient financial flexibility to fund operations,
working capital requirements and capital expenditures; (iii) capital and
financial market conditions as of the date hereof; and (iv) Reorganized AMF's
ability to attract and retain key managers.
Even if Reorganized AMF successfully implements its business
plan and achieves the financial projections included with this Disclosure
Statement, the trading market values for the Plan Securities could be adversely
impacted by: (i) lack of trading liquidity for such securities; (ii) lack of
institutional research coverage; and (iii) concentrated selling by recipients of
the Plan Securities.
57
J. Resale of the Plan Securities may be restricted by law.
The New AMF Common Stock, New Warrants and New AMF Notes will
be distributed under the Plan without registration under the Securities Act or
any state securities laws under exemptions from registration contained in
section 1145(a) of the Bankruptcy Code. With certain exceptions for "ordinary
trading transactions" by certain persons, if a holder of securities offered and
sold under the Plan is deemed to be an "underwriter" with respect to such
securities or an "affiliate" of the issuer of such securities, resales of such
securities by such holder would not be exempt from the registration requirements
under the Securities Act and securities laws under section 1145 of the
Bankruptcy Code and, accordingly, could be effected only under an effective
registration statement or a reliance on another applicable exemption from these
registration requirements. See section III.H.2., "Subsequent Transfers under
Federal Securities Laws."
K. Bankruptcy Risks
1. Parties in interest may object to the Debtors' classification of Claims.
Section 1122 of the Bankruptcy Code provides that a plan of
reorganization may place a claim or an interest in a particular class only if
such claim or interest is substantially similar to the other claims or interests
of such class. The Debtors believe that the classification of claims and
interests under the Plan complies with the requirements set forth in the
Bankruptcy Code. However, the Debtors cannot assure you that the Bankruptcy
Court will reach the same conclusion.
2. The commencement of the Reorganization Cases may have negative
implications under certain contracts of the Debtors.
The Debtors are parties to various contractual arrangements
under which the commencement of the Reorganization Cases and the other
transactions contemplated by the Plan could, subject to the Debtors' rights and
powers under sections 362 and 365 of the Bankruptcy Code, (i) result in a
breach, violation, default or conflict, (ii) give other parties thereto rights
of termination or cancellation, or (iii) have other adverse consequences for the
Debtors or the Reorganized Debtors. The magnitude of any such adverse
consequences may depend on, among other factors, the diligence and vigor with
which other parties to such contracts may seek to assert any such rights and
pursue any such remedies in respect of such matters, and the ability of the
Debtors or Reorganized Debtors to resolve such matters on acceptable terms
through negotiations with such other parties or otherwise.
3. The Debtors may not be able to secure confirmation of the Plan.
The Debtors cannot assure you that the requisite acceptances
to confirm the Plan will be received. Even if the requisite acceptances are
received, the Debtors cannot assure you that the Bankruptcy Court will confirm
the Plan. A non-accepting creditor or equity security holder of the Debtors
might challenge the adequacy of the Disclosure Statement or the balloting
procedures and results as not being in compliance with the Bankruptcy Code or
Bankruptcy Rules. Even if the Bankruptcy Court determined that the Disclosure
Statement and the balloting procedures and results were appropriate, the
Bankruptcy Court could still decline to confirm the Plan if it found that any of
the statutory requirements for confirmation had not been met. Section 1129 of
the Bankruptcy Code sets forth the requirements for confirmation and requires,
among other things, a finding by the Bankruptcy Court that the confirmation of
the Plan is not likely to be followed by a liquidation or a need for further
financial reorganization and that the value of distributions to non-accepting
holders of claims and interests within a particular class under the Plan will
not be less than the value of distributions such holders would receive if the
Debtors were liquidated under chapter 7 of the Bankruptcy Code. While the
Debtors cannot assure you that the Bankruptcy Court will conclude that these
requirements have been met, the Debtors believe that the Plan will not be
58
followed by a need for further financial reorganization and that non-accepting
holders within each class under the Plan will receive distributions at least as
great as would be received following a liquidation under chapter 7 of the
Bankruptcy Code when taking into consideration all administrative claims and
costs associated with any such chapter 7 case.
The confirmation and consummation of the Plan are also subject
to certain conditions. If the Plan is not confirmed, it is unclear whether a
restructuring of the Debtors could be implemented and what distribution holders
of Claims or Equity Interests ultimately would receive with respect to their
Claims or Equity Interests. If an alternative reorganization could not be agreed
to, it is possible the that Debtors would have to liquidate their assets, in
which case it is likely that holders of Claims or Equity Interests would receive
substantially less favorable treatment than they would receive under the Plan.
4. The Debtors may object to the amount or classification of your claim.
The Debtors reserve the right to object to the amount or
classification of any claim or interest. The estimates set forth in this
Disclosure Statement cannot be relied on by any creditor whose claim or interest
is subject to an objection. Any such claim or interest holder may not receive
its specified share of the estimated distributions described in this Disclosure
Statement.
L. Changes in the cash position of the Reorganized Debtors can have significant
adverse effects on the amount and value of distributions under the Plan.
To the extent that the cash needs of the Reorganized Debtors
materially exceed estimates, including cash payments to be made with respect to
applicable Claims under the Plan, the value of the New AMF Common Stock and New
Warrants distributed under the Plan would be negatively impacted and thereby
adversely impact recoveries of Claim holders under the Plan.
M. Reorganized AMF does not expect to pay any dividends on the New AMF Common
Stock for the foreseeable future.
The terms of the Exit Facility and the New Senior Subordinated
Note Indenture will restrict Reorganized AMF's ability to pay dividends, and it
is not anticipated that any cash dividends will be paid on the New AMF Common
Stock for the foreseeable future.
N. Certain tax implications of the Debtors' bankruptcy and reorganization may
increase the tax liability of Reorganized AMF.
The U.S. federal income tax consequences of consummation of
the Plan to holders of Claims or Equity Interests are complex and subject to
uncertainty. Certain U.S. tax attributes of the Debtors, including net operating
loss carryovers ("NOLs"), may be reduced or eliminated as a consequence of the
Plan. The elimination or reduction of NOLs and such other tax attributes may
increase the amount of tax payable by Reorganized AMF following the consummation
of the Plan as compared with the amount of tax payable had no such reduction
been required.
See section IX, "Certain U.S. Federal Income Tax Consequences"
below for discussion of the U.S. federal income tax consequences for creditors,
equity holders and the Debtors resulting from the consummation of the Plan.
59
V. CONFIRMATION OF THE PLAN
A. Confirmation Generally
The Bankruptcy Code requires the Bankruptcy Court to determine
whether a plan of reorganization complies with the technical requirements of
chapter 11 of the Bankruptcy Code. It requires further that a debtor's
disclosures concerning its plan of reorganization have been adequate and have
included information concerning all payments made or promised by the debtor in
connection with the plan.
If the Plan is confirmed, the Debtors expect the Effective
Date to occur not later than thirty days after the Confirmation Date.
To confirm the Plan, the Bankruptcy Court must find that all
of these and certain other requirements have been met. Thus, even if the
specified majority vote in number and dollar amount is achieved for each Class
of Impaired Claims, the Bankruptcy Court must make independent findings
respecting the Plan's conformity with the requirements of the Bankruptcy Code
before it may confirm the Plan. Some of these statutory requirements are
discussed below.
B. Voting Procedures and Standards
Holders of Claims or Equity Interests in Classes that are
"Impaired" under the Plan (but not deemed to reject the Plan by virtue of
receiving no distributions under the Plan) will receive this Disclosure
Statement and a ballot for the acceptance or rejection of the Plan.
A class is "Impaired" under a plan unless, with respect to
each claim or interest of such class, the plan:
o leaves unaltered the legal, equitable and contractual rights to which the
claim or interest entitles the holder of such claim or interest; or
o notwithstanding any contractual provision or applicable law that entitles
the holder of such claim or interest to demand or receive accelerated
payment on account of a default, cures any default, reinstates the original
maturity of the obligation, compensates the holder for any damages incurred
as a result of reasonable reliance on such provision or law and does not
otherwise alter the legal, equitable or contractual rights of such holder
based on such claim or interest.
A class that is not Impaired under a plan of reorganization is
deemed to have accepted the plan and, therefore, solicitation of acceptances
with respect to such class is not required.
The Debtors have filed a motion seeking an order to set
certain procedures in connection with voting on the Plan (the "Voting Procedures
Order"). If the Voting Procedures Order is approved it will set forth the
procedures to be employed in tabulating acceptances and rejections of the Plan.
60
- --------------------------------------------------------------------------------
If a ballot is damaged or lost or if you have any
questions concerning voting procedures, you may
contact the Debtors' Voting Agent:
AMF Bowling Worldwide, Inc. Balloting Center
[c/o Bankruptcy Services, LLC]
[70 East 55th Street]
New York, NY 10022
1-800-___-____
- --------------------------------------------------------------------------------
A vote may be disregarded if the Bankruptcy Court determines,
after notice and a hearing, that such acceptance or rejection was not made or
solicited or procured in good faith or in accordance with the provisions of the
Bankruptcy Code.
Under the Bankruptcy Code, for the Plan to be "accepted," a
specified majority vote in numbers of claims and dollar amount is required for
each Class of Impaired Claims. Any Impaired Class that fails to achieve the
specified majority vote will be deemed to have rejected the Plan.
C. Acceptance
The Bankruptcy Code defines acceptance of a plan by an
Impaired class of claims as acceptance by holders of at least two-thirds in
dollar amount, and more than one-half in number, of Allowed claims of that class
that actually vote. Acceptance of the Plan need only be solicited from holders
of Claims whose Claims belong to a Class that is "Impaired" and not deemed to
have rejected the Plan. See section I.C., "Voting," above. Except in the context
of a "cram down" (described below), as a condition to confirmation of the Plan,
the Bankruptcy Code requires that, with certain exceptions, each Impaired Class
accepts the Plan. If the specified majorities are not obtained, the Debtors have
the right, assuming that at least one Impaired Class has accepted the Plan, to
request confirmation of the Plan under section 1129(b) of the Bankruptcy Code.
This procedure is commonly referred to as a "cram down." For a more detailed
description of the requirements for acceptance of the Plan and of the criteria
for confirmation of the Plan notwithstanding rejection by certain Impaired
Classes, see section V.D.3, "Cram Down," below.
D. Confirmation and Consummation
At the Confirmation Hearing, the Bankruptcy Court will
determine whether the requirements of section 1129(a) of the Bankruptcy Code
have been satisfied with respect to the Plan. Confirmation of a plan under
section 1129(a) of the Bankruptcy Code requires, among other things, that:
o the plan complies with the applicable provisions of the Bankruptcy Code;
o the proponent of the plan has complied with the applicable provisions of
the Bankruptcy Code;
o the plan has been proposed in good faith and not by any means forbidden by
law;
o any payment made or to be made by the proponent under the plan for
services or for costs and expenses in, or in connection with, the chapter
11 case, or in connection with the plan and incident to the case, has been
approved by, or is subject to the approval of, the bankruptcy court as
reasonable;
61
o the proponent has disclosed the identity and affiliations of any individual
proposed to serve, after confirmation of the plan, as a director, officer,
or voting trustee of the debtor, an affiliate of the debtor participating
in the plan with the debtor, or a successor to the debtor under the plan.
The appointment to, or continuance in, such office of such individual, must
be consistent with the interests of creditors and equity security holders
and with public policy and the proponent must have disclosed the identity
of any insider that the reorganized debtor will employ or retain, and the
nature of any compensation for such insider;
o with respect to each Impaired class of claims or interests, either each
holder of a claim or interest of such class has accepted the plan, or will
receive or retain under the plan on account of such claim or interest,
property of a value, as of the effective date of the plan, that is not
less than the amount that such holder would receive or retain if the debtor
were liquidated on such date under chapter 7 of the Bankruptcy Code;
o each class of claims or interests has either accepted the plan or is not
Impaired under the plan;
o except to the extent that the holder of a particular claim has agreed to a
different treatment of such claim, the plan provides that allowed
administrative expenses and priority claims (other than priority tax
claims) will be paid in full on the effective date (except that if a class
of priority claims has voted to accept the Plan, holders of such claims may
receive deferred cash payments of a value, as of the effective date of the
plan, equal to the allowed amounts of such claims) and that holders of
priority tax claims may receive on account of such claims deferred cash
payments, over a period not exceeding six years after the date of
assessment of such claims, of a value, as of the effective date, equal to
the allowed amount of such claims;
o if a class of claims is Impaired, at least one Impaired class of claims has
accepted the plan, determined without including any acceptance of the plan
by any insider holding a claim in such class; and
o confirmation of the plan is not likely to be followed by the liquidation,
or the need for further financial reorganization, of the debtor or any
successor to the debtor under the plan, unless such liquidation or
reorganization is proposed in the plan.
Subject to receiving the requisite votes in accordance with section 1129(a)(8)
of the Bankruptcy Code and the "cram down" of Classes not receiving any
distribution under the Plan, the Debtors believe that:
o the Plan satisfies all of the statutory requirements of chapter 11 of the
Bankruptcy Code;
o the Debtors have complied or will have complied with all of the
requirements of chapter 11 of the Bankruptcy Code; and
o the Plan has been proposed in good faith.
Set forth below is a more detailed summary of the relevant
statutory confirmation requirements.
62
1. Best Interests of Holders of Claims and Interests
The "best interests" test requires that the Bankruptcy Court
find either that all members of each Impaired class have accepted the plan or
that each holder of an allowed claim or interest of each Impaired class of
claims or interests will receive or retain under the plan on account of such
claim or interest property of a value, as of the effective date of the plan,
that is not less than the amount that such holder would so receive or retain if
the debtor were liquidated under chapter 7 of the Bankruptcy Code on such date.
The first step in meeting this test is to determine the dollar amount that would
be generated from the liquidation of the Debtors' assets and properties in a
chapter 7 liquidation case. The gross amount of cash available in such a
liquidation would be the sum of the proceeds from the disposition of the
Debtors' assets and the cash held by the Debtors at the time of the commencement
of the chapter 7 case. This gross amount would be reduced by the amount of any
Allowed Claims secured by such assets, the costs and expenses of the
liquidation, and such additional administrative expenses and priority claims
that may result from the termination of the Debtors' business and the use of
chapter 7 for the purposes of liquidation. Any remaining net cash would be
allocated to creditors and shareholders in strict accordance with the order of
priority of claims contained in section 726 of the Bankruptcy Code. The Debtors
have determined, as discussed in the liquidation analysis attached as Exhibit F
hereto, that confirmation of the Plan will provide each creditor and interest
holder with a recovery that is not less than it would receive pursuant to a
liquidation of the Debtors under chapter 7 of the Bankruptcy Code. See the
liquidation analysis annexed as Exhibit F hereto for a further discussion of how
the Plan satisfies the "best interests" test.
2. Financial Feasibility
Section 1129(a)(11) of the Bankruptcy Code requires that
confirmation should not be likely to be followed by the liquidation, or the need
for further financial reorganization, of the Debtors or any successor to the
Debtors unless such liquidation or reorganization is proposed in the Plan. Under
the terms of the Plan, the Allowed Claims potentially being paid in whole or
part in cash are the Allowed Administrative Expense Claims, Allowed Fee Claims,
Allowed Priority Tax Claims, Allowed Priority Non-Tax Claims, Allowed Other
Secured Claims, Allowed DIP Lender Claims, Allowed Convenience Claims and
Allowed Senior Lender Claims. The Debtors have estimated the total amount of
these cash payments are $____ million (see table at section I.E.1, "Summary of
Classification and Treatment of Claims" above) and expects sufficient liquidity
from operations and the Exit Facility to fund these cash payments as and when
they become due.
The Debtors have prepared detailed financial projections, set
forth and described more fully below, which detail, among other things, the
financial feasibility of the Plan. The Debtors' projections indicate, on a pro
forma basis, that for fiscal years 2001 through 2005, the Debtors expect the
Reorganized Company to generate approximately $117 million to $162 million in
EBITDA. This is more than sufficient to satisfy all of the Debtors' future
interest, capital expenditure and other obligations during this period.
Accordingly, the Debtors believe that confirmation of the Plan is not likely to
be followed by the liquidation or further reorganization of the Reorganized
Company. Please see section IV.C. and IV.D., "Risk Factors," for a discussion of
some of the risks that could affect the Reorganized Debtors' ability to repay
their post-Effective Date indebtedness, including their ability to access
refinancing if their future cash flows are insufficient to allow them to do so.
63
3. Cram Down
- --------------------------------------------------------------------------------
CRAM DOWN BY DEBTORS
The Debtors are seeking to cram down this Plan on
certain holders of Claims and Equity Interests in
Impaired Classes and reserve the right to cram down
this Plan on other holders of Claims in Impaired
Classes.
- --------------------------------------------------------------------------------
The Bankruptcy Code contains provisions for confirmation of a
plan even if the plan is not accepted by all Impaired classes, as long as at
least one Impaired class of claims has accepted the Plan. The "cram down"
provisions of the Bankruptcy Code are set forth in section 1129(b) of the
Bankruptcy Code.
Under the "cram down" provisions, on the request of a plan
proponent the Bankruptcy Court will confirm a plan despite the lack of
acceptance by an Impaired class or classes if the bankruptcy court finds that:
o the plan does not discriminate unfairly with respect to each non-accepting
Impaired class;
o the plan is fair and equitable with respect to each non-accepting Impaired
class; and
o at least one Impaired class has accepted the plan.
These standards ensure that holders of junior interests, such
as common stockholders, cannot retain any interest in the debtor under a plan of
reorganization that has been rejected by a senior Impaired class of claims or
interests unless the claims or interests in that senior Impaired class are paid
in full.
As used by the Bankruptcy Code, the phrases "discriminate
unfairly" and "fair and equitable" have narrow and specific meanings unique to
bankruptcy law. A plan does not discriminate unfairly if claims or interests in
different classes but with similar priorities and characteristics receive or
retain property of similar value under a plan. By establishing separate Classes
for the holders of each type of Claim and by treating each holder of a Claim in
each Class similarly, the Plan has been structured so as to meet the "unfair
discrimination" test of section 1129(b) of the Bankruptcy Code.
The Bankruptcy Code sets forth different standards for
establishing that a plan is "fair and equitable" with respect to a dissenting
class, depending on whether the class is comprised of secured or unsecured
claims. In general, section 1129(b) of the Bankruptcy Code permits confirmation
notwithstanding non-acceptance by an Impaired class if that class and all junior
classes are treated in accordance with the "absolute priority" rule, which
requires that the dissenting class be paid in full before a junior class may
receive anything under the plan. In the Reorganization Cases it is currently
anticipated that the holders of Claims in the senior Impaired class--the holders
of Senior Lender Claims--will consent to the Plan. Because no junior class is
receiving any distribution under the Plan and the holders of Claims in Classes
4, 5 and 6 are being treated fairly, equitably and in a non-discriminatory
manner, the Debtors will seek to confirm the Plan regardless of whether holders
of Claims in Classes 4, 5 and 6 vote to accept the Plan.
64
With respect to a Class of unsecured claims that does not
accept the Plan, the Debtors must demonstrate to the Bankruptcy Court that
either:
o each holder of an unsecured claim in the dissenting Class receives or
retains under such Plan property of a value equal to the allowed amount of
its unsecured claim; or
o the holders of claims or holders of interests that are junior to the claims
of the holders of such unsecured claims will not receive or retain any
property under the Plan.
Additionally, the Debtors must demonstrate that no class
senior to a non-accepting Impaired class receives more than payment in full on
its claims.
If the Class of Unsecured Claims, Tort Claims, Senior
Subordinated Notes or Senior Secured Claims votes to reject the Plan, the Plan
is nevertheless designed to satisfy these standards, as the holders of Equity
Interests will receive no recovery under the Plan and no Class will receive more
than payment in full on Claims in such Class.
If all the applicable requirements for confirmation of the
Plan are met as set forth in sections 1129(a)(1) through (13) of the Bankruptcy
Code, except that one or more of Classes of Impaired Claims have failed to
accept the Plan under section 1129(a)(8) of the Bankruptcy Code, the Debtors
will request that the Bankruptcy Court confirm the Plan in accordance with
section 1129(b) of the Bankruptcy Code. The Debtors believe that the Plan
satisfies the "cram down" requirements of the Bankruptcy Code, but cannot assure
you that the Bankruptcy Court will determine that the Plan meets the
requirements of section 1129(b) of the Bankruptcy Code.
4. Classification of Claims and Interests
The Debtors believe that the Plan meets the classification
requirements of the Bankruptcy Code which require that a plan of reorganization
place each claim or interest into a class with other claims or interests that
are "substantially similar."
VI. CERTAIN EFFECTS OF THE PLAN
A. Reorganized AMF
With certain exceptions, the Debtors will continue to be
incorporated under amended certificates or articles of incorporation as Texas,
Kansas, South Carolina, West Virginia, Oregon, Delaware or Virginia corporations
(as applicable) as of the Effective Date, with all of the powers of a
corporation under applicable law. The Plan provides for the dissolution of
certain specified Debtors, including Holdings, AMF Bowling Holdings Inc., AMF
Worldwide Bowling Centers Holdings Inc., AMF BCO-UK One, Inc., AMF BCO-UK Two,
Inc., AMF BCO-France One, Inc., AMF BCO-France Two, Inc., AMF Bowling Mexico
Holding, Inc., and Boliches AMF, Inc., in connection with a simplification of
the post-bankruptcy affiliate and subsidiary relationships among the Reorganized
Debtors and their Non-Debtor Subsidiaries.
65
Under the Plan, Reorganized AMF will continue to be
incorporated under Delaware law on or before the Effective Date under the
Amended Certificate of Incorporation, and the subsidiaries of the Reorganized
Debtors will be established as subsidiaries of Reorganized AMF. As described in
section II.B., "New AMF Common Stock," the New AMF Common Stock of Reorganized
AMF will be distributed to holders of Claims in Class 2 according to the terms
of the Plan. The Amended and Restated Certificate of Incorporation and By-Laws
of Reorganized AMF will prohibit the issuance of nonvoting stock to the extent
required by section 1123(a) of the Bankruptcy Code. After the Effective Date,
Reorganized AMF may amend or modify its certificate of incorporation and by-laws
in any manner consistent with the Plan, as permitted under applicable law and/or
such certificate of incorporation and by-laws.
Except as otherwise expressly provided in the Plan, or any and
all documents executed in accordance with the Plan, on the Effective Date, the
Reorganized Debtors will be vested with all of the property of the Debtors'
Estates free and clear of all Claims, liens, encumbrances, charges and other
interests of creditors and equity security holders, and may operate their
businesses and may use, acquire, and dispose of property free of any
restrictions imposed by the Bankruptcy Code or the Bankruptcy Rules and in all
respects as if there were no pending cases under any chapter or provision of the
Bankruptcy Code.
On the Effective Date, Holdings shall dissolve pursuant to
applicable state law. On the Effective Date, any property of Holdings not
previously distributed pursuant to this Plan shall vest in the Reorganized
Debtors free and clear of all Claims, liens encumbrances, charges, and other
interests, except as expressly provided in the Plan.
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B. Financial Projections and Valuation Analysis
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ACTUAL RESULTS MAY NOT MEET PROJECTIONS
The projections in this disclosure statement are based on a number of
significant assumptions. Actual operating results and values may vary. See
section IV, "Risk Factors," for a discussion of some of the factors that could
cause actual results to vary.
The Debtors' management has prepared the Projections contained in this
Disclosure Statement in connection with the development of the Plan. The
Projections assume the Plan and the transactions it contemplates will be
implemented in accordance with their terms. The assumptions and estimates
underlying the Projections are inherently uncertain and are subject to
significant business, economic and competitive risks and uncertainties that
could cause actual results to differ materially from those projected. Such
uncertainties and other factors include the Reorganized Debtors' ability to
provide their services and products, access to adequate financing, ability to
attract and retain key management personnel, general economic conditions, and
other factors, including those risks discussed in this section. Accordingly, the
Projections are not necessarily indicative of the future financial condition or
results of operations of the Reorganized Debtors, which may vary significantly
from those set forth in the Projections. Consequently, the Projections should
not be regarded as a representation by the Debtors, the Debtors' advisors, or
any other person that the Projections can or will be achieved.
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In connection with the allocation of the distributions under
the Plan, the Debtors determined that it was necessary to estimate
post-confirmation values for the equity of Reorganized AMF to provide for
equitable distribution among Classes of Claims. Accordingly, the Debtors
directed Blackstone to prepare a valuation analysis of Reorganized AMF (which
includes the value of all non-filing subsidiaries of the Debtors).
In addition, the Debtors developed the Projections (summarized
below and in Exhibit E) to assess the value of Reorganized AMF generally, and
specifically the value of Reorganized AMF Common Stock to be distributed under
the Plan. The projections and valuations set forth below and in Exhibit E are
based on a number of significant assumptions including, among other things, the
successful reorganization of the Debtors, an assumed Effective Date of December
31, 2001 and no significant downturn in the specific markets in which the
Debtors operate.
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Valuation
Two methodologies were used to derive the reorganization value of
Reorganized AMF based on the Projections:
o a calculation of the present value of the free cash flows under the
Projections, including an assumption for a terminal value; and
o a comparison of Reorganized AMF and its projected performance to the market
values of comparable companies.
The market-based approach involves identifying a group of
publicly traded companies whose principal characteristics are reasonably
comparable to those of the Debtors as a whole or significant portions of the
Debtors' operations, and then calculating ratios of various financial results to
the public market values of these companies. The ranges of ratios derived are
then applied to Reorganized AMF's projected financial results to derive a range
of implied enterprise values of Reorganized AMF. The discounted cash flow
approach involves deriving the unlevered free cash flows (before debt service)
that Reorganized AMF would generate assuming the projections were realized.
These cash flows, and an estimated value of the company at the end of the
projected period, are discounted to the present at Reorganized AMF's estimated
post-restructuring weighted average cost of capital to determine the enterprise
value of Reorganized AMF.
Estimates of value do not purport to be appraisals nor do they
necessarily reflect the values that may be realized if assets are sold. The
estimates of value represent hypothetical reorganized enterprise values assuming
the implementation of the business strategies described in section IV "Risk
Factors" above, as well as other significant assumptions. Such estimates were
developed solely for purposes of formulating and negotiating a plan of
reorganization and analyzing the projected recoveries under the Plan.
Based on the methods described above, the estimated enterprise
value for Reorganized AMF is between $645 million and $685 million, with a
midpoint value of approximately $665 million. After deducting the estimated
long-term indebtedness of Reorganized AMF at the Effective Date of approximately
$453 million (based on the Exit Facility, the New AMF Notes and debt
attributable to the Other Secured Claims) from Reorganized AMF's enterprise
value, the estimated total equity value of Reorganized AMF is between $192
million and $232 million, with a midpoint value of $212 million. Therefore,
assuming that 10,000,000 shares of New AMF Common Stock will be issued on the
Effective Date, the midpoint value of the New AMF Common Stock is estimated to
be $19.65 per share, after deducting the assumed value of the New Warrants and
initial grant of options to members of AMF management under the New Management
Incentive Plan. Using the Black-Scholes option pricing method, the Debtor has
estimated the value of the New Warrants to be approximately $9.6 million and the
value of the initial grant of the New Management Options to be approximately
$5.9 million. The valuation of the New Warrants was based on, among other
things, estimates of volatility of the New AMF Common Stock. See Exhibit F to
the Disclosure Statement for a more detailed analysis of the recoveries to
holders of Claims and Equity Interests.
The estimated enterprise value is highly dependent upon
achieving the future financial results set forth in the projections as well as
the realization of certain other assumptions that are not guaranteed.
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The valuations set forth herein represent estimated
reorganization values and do not necessarily reflect values that could be
attainable in public or private markets. The equity value ascribed in the
analysis does not purport to be an estimate of the post-reorganization market
value. Such market value, if any, may be materially different from the
reorganization equity value ranges associated with the valuation analysis.
As a result of the consummation of the Plan and the
transactions contemplated by the Plan, the financial condition and results of
operations of the Reorganized Debtors from and after the Effective Date will not
be comparable to the financial condition or results of operations reflected in
the historical financial statements of the Debtors contained in the Plan and in
the Exhibits attached hereto and in the Plan Supplement.
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Note on Estimates of Value in this Disclosure Statement
Estimates of value do not purport to be appraisals nor do they necessarily
reflect the values that may be realized if assets are sold. The estimates of
value represent hypothetical enterprise values for
Reorganized AMF assuming the implementation of Reorganized
AMF's business strategies as well as other significant
assumptions. Such estimates were developed solely for
purposes of formulating and negotiating a plan of reorganization
and analyzing the projected recoveries under the Plan.
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C. The Role of the Creditors' Committee
On the Effective Date, the duties of the Creditors' Committee
will terminate and the Creditors' Committee will dissolve.
D. Post-Confirmation Jurisdiction of the Bankruptcy Court
On and after the Effective Date, the Bankruptcy Court will
retain jurisdiction over all matters arising in, arising under, and related to
the Reorganization Cases for, among other things, the following purposes:
(a) to hear and determine applications for the assumption or
rejection of executory contracts or unexpired leases and the allowance of
resulting Claims;
(b) to determine any motion, adversary proceeding, avoidance action,
application, contested matter, and other litigated matter pending on or
commenced after the Confirmation Date;
(c) to ensure that distributions to holders of Allowed Claims are
accomplished as provided in the Plan;
(d) to consider Claims or the allowance, classification, priority,
compromise, estimation, or payment of any Claim, Administrative Expense
Claim, or Equity Interest;
(e) to enter, implement, or enforce appropriate orders if the
Confirmation Order is for any reason stayed, reversed, revoked, modified,
or vacated;
69
(f) to issue injunctions, enter and implement other orders, and take
other necessary or appropriate actions to restrain interference by any
person with the consummation, implementation, or enforcement of the Plan of
Reorganization, the Confirmation Order, or any other order of the
Bankruptcy Court;
(g) to hear and determine any application to modify the Plan of
Reorganization in accordance with section 1127 of the Bankruptcy Code, to
remedy any defect or omission or reconcile any inconsistency in the Plan of
Reorganization, the Disclosure Statement, or any order of the Bankruptcy
Court, including the Confirmation Order, in such a manner as may be
necessary to carry out the purposes and effects thereof;
(h) to hear and determine all Fee Claims;
(i) to hear and determine disputes arising in connection with the
interpretation, implementation, or enforcement of the Plan of
Reorganization, the Confirmation Order, any transactions or payments
contemplated hereby, or any agreement, instrument, or other document
governing or relating to any of the foregoing;
(j) to take any action and issue orders necessary to construe,
enforce, implement, execute, and consummate the Plan of Reorganization,
including any release or injunction provisions set forth in the Plan, or to
maintain the integrity of the Plan of Reorganization following
consummation;
(k) to determine such other matters and for such other purposes as
may be provided in the Confirmation Order;
(l) to hear and determine matters concerning state, local, and
federal taxes in accordance with sections 346, 505, and 1146 of the
Bankruptcy Code;
(m) to hear and determine any other matters related to the Plan and
not inconsistent with the Bankruptcy Code and title 28 of the United States
Code;
(n) to enter a final decree closing the Reorganization Cases; and
(o) to recover all assets of the Debtors and property of the Estates,
wherever located.
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Exceptions to Post-Reorganization Bankruptcy Court Jurisdiction
The Bankruptcy Court may not have jurisdiction over, or may
abstain from hearing, certain disputes arising under or
relating to the New AMF Common
Stock, the New Warrants, the New AMF Notes, any agreements
related thereto, or the Exit Facility, notwithstanding the
provisions that contemplate continuing
Bankruptcy Court jurisdiction in the Plan.
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VII. HISTORICAL INFORMATION
A. Business and Significant Recent Events
The Debtors and their non-debtor foreign subsidiaries and
affiliates (the "Non-Debtor Subsidiaries") are principally engaged in two lines
of business. As of August __, 2001, WINC owned and operated approximately ____
bowling centers in the United States and approximately ____ bowling centers in
ten other countries. The Debtors also manufacture and sell bowling center
equipment such as automatic pin spotters, automatic scoring equipment, bowling
pins, lanes, ball returns, certain spare parts, and resell allied products such
as bowling balls, bags, shoes and certain other spare parts and consumer
products worldwide. In addition to its bowling-related businesses, the Debtors
manufacture and sell the Playmaster, Highland and Renaissance brands of
billiards tables, and own the Michael Jordan Golf Company, which currently
operates two golf practice ranges. Since the Commencement Date, the Debtors have
continued to manage their businesses and affairs in the ordinary course as
debtors-in-possession, subject to the control and supervision of the Bankruptcy
Court.
As of August 31, 2001, the Debtors employed approximately
15,020 full and part-time employees worldwide, including approximately 14,225
who worked in the Debtors' bowling centers in the United States and abroad and
655 employees who worked in the Debtors' bowling equipment business. In
addition, approximately 140 corporate-level employees were employed by WINC in
the United States.
WINC conducts all of its business through subsidiaries and
provides certain limited management service operations to its subsidiaries.
Holdings is a holding company that has no employees, conducts no operations and
holds no assets other than its investment in WINC. WINC is a wholly-owned,
direct subsidiary of Holdings and Holdings is a wholly-owned, direct subsidiary
of BINC (which is not a Debtor in the joint Reorganization Cases and not a
proponent of the Plan). Holdings and WINC are Delaware corporations. A number of
the Subsidiary Debtors are holding companies that have no employees, conduct no
operations and hold no assets other than investments in other subsidiaries of
WINC. These include AMF Bowling Holdings Inc., AMF Bowling Centers Holdings
Inc., AMF Worldwide Bowling Centers Holdings Inc., Boliches AMF, Inc., AMF
Bowling Mexico Holding, Inc., AMF BCO-France One, Inc., AMF BCO-France Two,
Inc., AMF BCO-UK One, Inc. and AMF BCO-UK Two, Inc.
An investor group led by affiliates of Goldman, Sachs & Co.
acquired WINC in 1996. In connection with the financing of the acquisition, WINC
issued the Senior Subordinated Notes and the Senior Subordinated Discount Notes.
Since the acquisition and before December 31, 2000, the Debtors purchased an
aggregate of 280 bowling centers for a combined purchase price of approximately
$507.4 million. The Debtors have funded their acquisitions and center
construction from internally generated cash, borrowings under the Senior Lender
Agreements, issuances of BINC common stock (the "BINC Common Stock") and BINC's
Zero Coupon Convertible Debentures due 2018.
71
In November 1997, BINC issued 15,525,000 shares of the BINC
Common Stock to the public in connection with an initial public offering. During
2000, the New York Stock Exchange (the "NYSE") delisted the BINC Common Stock,
the Senior Subordinated Notes and Senior Subordinated Discount Notes of WINC.
The NYSE's action was taken in part due to the restructuring of the Debtors and
in part because the BINC Common Stock traded below the NYSE's continued listing
criteria relating to a minimum share price. Since November 22, 2000, the BINC
Common Stock has traded in the over-the-counter market under the symbol "AMBW."
Prior to the Commencement Date, the Debtors' working capital
and operational financing was derived primarily from internally generated funds
and borrowings under the Senior Lender Agreements. The Senior Lender Agreements
were provided to WINC through a syndicate of banks led by Goldman Sachs Credit
Partners, L.P. and Citicorp Securities, Inc., as arrangers, Goldman Sachs Credit
Partners, L.P., as syndication agent, and Citibank, as administrative agent for
the Senior Lenders (the "Senior Lender Administrative Agent").
Under the Senior Lender Agreements, the following borrowings
were outstanding as of the Commencement Date:
o approximately $249.3 million of working capital advances under a revolving
line of credit, which does not include approximately $8.2 million of
standby letters of credit,
o a term loan of approximately $52.5 million (the "Term Loan"),
o an Amortization Extended Loan ("AXEL") Series A of approximately $181.5
million, and
o an AXEL Series B of approximately $131.1 million.
The indebtedness under the Senior Lender Agreements is
guaranteed by Holdings and the majority of the Subsidiary Debtors and is secured
by certain assets. Specifically, WINC and its subsidiary guarantors granted the
holders of Senior Lender Claims a lien on and security interest in the following
collateral to secure obligations under the Senior Lender Agreements:
o certain personal property, including inventory, accounts receivable,
equipment and general intangibles;
o the capital stock of WINC and its domestic subsidiaries and second-tier
subsidiaries;
o 66% of the capital stock of certain of WINC's first-tier international
subsidiaries;
o certain fee property and leased property of WINC,
o all improvements and appurtenances on the fee property and leased property,
and
o certain rents.
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The Debtors also have an aggregate of approximately $574
million in principal amount outstanding under the Senior Subordinated Notes. As
of the Commencement Date, WINC owed an aggregate of approximately $287 million
in principal and accumulated interest under the 10 7/8% Series A and Series B
Senior Subordinated Notes due 2006. Additionally, as of the Commencement Date,
WINC owed an aggregate amount of approximately $287 million in principal and
accumulated interest under the 12.25% Series A and Series B Senior Subordinated
Discount Notes due 2006. The Senior Subordinated Notes are unsecured obligations
of WINC guaranteed by Holdings and certain specified subsidiaries of the
Debtors. The Senior Subordinated Notes are subordinated in right of payment to
all obligations under the Senior Lender Agreements and rank pari passu with all
existing subordinated debt of WINC.
B. Events Leading to Chapter 11 and the Need to Reorganize
Both the Debtors' bowling products and bowling centers lines
of business are subject to intense competition. AMF is one of two major
providers of a full line of bowling equipment and products. However, there are
numerous competitors who manufacture and sell selected bowling equipment and
products. Competition in the Debtors' bowling centers line of business includes
not only other bowling centers, but also purveyors of numerous other leisure
activities. Accordingly, competition from other suppliers and the availability
and affordability of sports, recreational and entertainment alternatives has
hampered the Debtors' ability to generate the cash flow necessary to sustain
their highly leveraged capital structure. The significant decline in demand from
international markets for the Debtors' bowling products has further contributed
to the Debtors' reduced cash flow. In addition to importation issues that make
it difficult for the Debtors to compete against local manufacturers in China, no
international market has emerged with the strong demand experienced in Asia in
the early and mid 1990's, and the limited availability of financing for
customers seeking to build new centers has had an adverse impact on the Debtors'
bowling products line of business.
The Debtors determined that the continued viability of their
businesses requires restructuring their highly leveraged capital structure. In
May 2000, the Debtors retained The Blackstone Group, L.P. ("Blackstone") as
financial advisors to assist them in restructuring their debt. Shortly
thereafter Blackstone and the company began meeting with the Debtors' two
principal creditor constituencies, represented by (a) the Senior Lender Steering
Committee and (b) the Informal Committee (collectively, the "Restructuring
Committees"). Exhibit D lists the members of the Senior Lender Steering
Committee. At that time, the Debtors goal was to prepare and file a
"prenegotiated" plan of reorganization under chapter 11 of the Bankruptcy Code
and emerge from a chapter 11 proceeding as quickly as possible.
When restructuring discussions commenced in August 2000 among
the Debtors and the Restructuring Committees, the Debtors intended to
o restructure WINC's capital structure to reduce its debt load,
o refinance the Debtors' obligations under the Senior Lender Agreements to
pay each of the existing lenders in full, and
o satisfy the Debtors' obligations under the Senior Subordinated Notes by
distributing substantially all of the common stock of Reorganized AMF to
their existing bondholders.
WINC's initial efforts to implement such a plan were not met
in part because of a downturn in the economy and poor capital and financing
market conditions, as a result of which WINC could not persuade traditional bank
lenders, high-yield lenders or mezzanine lenders to refinance in full the Senior
Lender Agreements on acceptable terms.
73
In August 2000, WINC and the Senior Lenders agreed to amend
the Senior Lender Agreements to waive the Debtors' compliance with the financial
covenants in the Senior Lender Agreements through December 31, 2000 (the
"Amendment"). The Amendment further provided for the permanent termination of an
aggregate of $100 million of the otherwise available working capital commitments
under the Senior Lender Agreements and required that the Debtors delay making
the interest payment of approximately $13.6 million otherwise due September 15,
2000 on the Senior Subordinated Notes. As this payment was not made within the
30-day cure period, this failure constituted an event of default as of October
15, 2000 under the Senior Subordinated Notes. Moreover, pursuant to the terms of
the Amendment, on or about September 30, 2000 the Debtors presented the Senior
Lenders with a preliminary plan to restructure their debt and a timeline for
implementation of such preliminary plan. A majority of the Senior Lenders
indicated that the preliminary restructuring plan proposed by the Debtors was
generally satisfactory in form and substance, subject to further approval of any
definitive plan. The waiver expired on December 31, 2000 and the Debtors failed
to make a scheduled principal payment of approximately $12.8 million due under
the Senior Lender Agreements. WINC paid $3.0 million of the $14.7 million of
interest then due on its bank debt on December 29, 2000. The remainder of the
$14.7 million of interest due was paid on a weekly schedule during the first
quarter of 2001 (at non-default interest rates). Accordingly, the Senior Lenders
have asserted that interest on the Debtors' obligations under the Senior Lender
Agreements has accrued and is accruing at the default rate.
WINC did not make the cash interest payment of approximately
$13.6 million on the Senior Subordinated Notes required on March 15, 2001.
Neither the obligations under the Senior Lender Agreements nor the Senior
Subordinated Notes have been accelerated. In addition, WINC did not make a
scheduled principal payment under the Senior Lender Agreements of $12.8 million,
which was due on March 30, 2001 but did make a $16.4 million interest payment
under the Senior Lender Agreements on March 30, 2001. This payment represented
interest at the non-default interest rate and was approximately $2.8 million
less than the interest would have been at the default rate. From April 30, 2001
until July 6, 2001, the Debtors made interest payments to the Senior Lenders
equaling approximately $23.5 million in the aggregate. By these payments, the
Debtors were able to "catch up" on all of the default-rate interest, which had
accrued prepetition under the Senior Lender Agreements.
As negotiations between the Debtors' and their major creditors
progressed, the cash flow of the Debtors' bowling products businesses continued
to decline as new markets for bowling products failed to emerge and customers
became increasingly wary of purchasing equipment from the Debtors in the midst
of their now very public financial problems. As discussed above, the Debtors are
not in compliance with certain material financial covenants made in connection
with the Senior Lender Agreements and have defaulted under the Senior
Subordinated Notes. On July 2, 2001, the Debtors filed for protection under
chapter 11 of the Bankruptcy Code.
Although AMF has been and remains a viable business enterprise
that generates substantial cash flow from operations, the Debtors filed for
protection under chapter 11 of the Bankruptcy Code due to liquidity problems the
Debtors have encountered because of their highly leveraged capital structure. In
response to further erosion of the Debtors' bowling products businesses and the
continued lull in the refinancing markets, with the help of their advisors, the
Debtors reopened discussions with the Restructuring Committees prior to the
Commencement Date to formulate a restructuring plan that was consistent with the
refinancing market and the condition of their business. In tandem with these
discussions, senior management has evaluated the Debtors' operations, and is now
implementing strategies to enhance their overall financial performance. In
August 2001, the Debtors and the Senior Lenders reached an agreement in
principle with respect to the primary terms of the Plan. Notwithstanding the
liquidity problems that the Debtors have encountered, the Debtors believe that
their business strategy remains fundamentally viable. The Debtors have
determined that the continued viability of their businesses requires a
restructuring of their highly leveraged capital structure. The Debtors will seek
to achieve this result through the restructuring embodied in the Plan.
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After the Commencement Date the Debtors undertook an ordinary
course review of their business plan and their actual financial results to date
in comparison to the results that had been forecasted in February 2001. The
Debtors determined that it was necessary to revise their business plan and
reduce the projected levels of EBITDA for the balance of fiscal 2001 and fiscal
years 2002 through 2004. A number of factors contributed to this result,
including the worsening outlook for the U.S. and global economies, the negative
impact of delays to the date by which the Debtors expected to emerge from a
restructuring, less aggressive expectations for the growth of certain businesses
of the Debtors in light of the less positive outlook for the United States and
non-U.S. markets for bowling products and bowling center operations and the
impact of the continuing strength of the U.S. dollar relative to currencies of
other countries. The projections attached as Exhibit E to this Disclosure
Statement represent the estimates of the Debtors' management of the forecasted
financial results for the Reorganized Debtors based on their current knowledge
and current facts and circumstances applicable to the Debtors' business.
Nonetheless, the Reorganized Debtors' actual financial results may vary from
those projected and the Debtors do not represent that the Reorganized Debtors
can or will achieve the projected financial results. See Section VI.B., "Certain
Effects of the Plan - Financial Projections and Valuation Analysis" for a
discussion of factors that may affect the financial results of the Reorganized
Debtors.
On August 30, 2001, Stephen E. Hare resigned as an officer and
director of WINC and Holdings and Christopher F. Caesar was appointed as Senior
Vice President and Chief Financial Officer in his place. Frederick G. Kraegel
was elected Senior Vice President and Chief Administrative Officer of WINC.
C. Relationship Between BINC and WINC
The members of the Board of Directors and management of BINC
are also the directors and management of WINC. As discussed above, BINC first
announced its intent to restructure in August 2000. In November 2000, the
directors and management of BINC retained separate legal advisors to assist the
directors and management of BINC in the evaluation of the alternatives for BINC
given the restructuring by WINC. On July 30, 2001, BINC commenced its own
chapter 11 case before the Bankruptcy Court. The BINC case is being administered
separately from the Debtors' cases.
Under the Senior Lender Agreements, WINC may not upstream
funds to BINC. BINC has no operating assets or businesses, very limited cash
resources and its only investment is the stock of its subsidiary, Holdings,
which is the parent of WINC.
VIII. THE CASES
A. Continuation of Business After the Commencement Date
Since the Commencement Date, the Debtors have continued to
operate their business in the ordinary course as debtors-in-possession under
sections 1107 and 1108 of the Bankruptcy Code. As described in greater detail
below, a variety of steps have been and will be taken to strengthen and enhance
the value of the Debtors' business during these cases.
1. Board of Directors
WINC's Board of Directors currently consists of eight members,
including two representatives of the Debtors' senior management.
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2. Management
WINC's management team consists of Roland C. Smith, President and Chief
Executive Officer, Frederick G. Kraegel, Senior Vice President and Chief
Administrative Officer, Christopher F. Caesar, Senior Vice President, Chief
Financial Officer and Treasurer, Timothy N. Scott, Senior Vice President of
Marketing, and John B. Suddarth, Senior Vice President and Chief Operating
Officer of the Debtors' bowling products business. Mr. Smith is also a member of
WINC's Board of Directors.
a. Roland C. Smith
Mr. Smith has been President and Chief Executive Officer of BINC and WINC
since joining the company in April 1999. Prior to joining BINC and WINC, Mr.
Smith was President and Chief Executive Officer of the Triarc Restaurant Group,
a restaurant franchisor that conducts its business through Arby's, Inc., from
1997 to 1999. Mr. Smith joined the Triarc Restaurant Group in 1994 as Vice
President of international marketing.
b. Frederick G. Kraegel
Mr. Kraegel has been the Senior Vice President and Chief Administrative
Officer of WINC since joining the company on August 13, 2001. Prior to joining
WINC, Mr. Kraegel was President of AREIL, Inc., the successor company to Acme
Markets of Virginia, a retail supermarket company. From 1991 through 1997, Mr.
Kraegel served as Senior Vice President and Chief Financial Officer of Best
Products Co., Inc. Mr. Kraegel also served as a partner at Peat Marwick Mitchell
& Co., now known as KPMG LLP.
c. Christopher F. Caesar
Mr. Caesar was named Senior Vice President and Chief Financial Officer of
WINC following the resignation of Stephen Hare on August 31, 2001. Mr. Caesar
served as Vice President and Treasurer of WINC from January 1999 until his
appointment as Chief Financial Officer. From 1998 until 1999 Mr. Caesar was Vice
President, Corporate Strategy for Danka Business Systems plc. From 1996 until
1998, Mr. Caesar served as Director of Financial Planning for WINC. Mr. Caesar
also served as Manager, Finance for James River Corporation from 1991 until
1996.
d. Timothy N. Scott
Mr. Scott has been the Senior Vice President of Marketing for
WINC since November, 1999. Prior to joining the company, Mr. Scott was employed
by Long John Silver's Restaurants, a restaurant franchisor, and served as its
Vice President, Marketing and Advertising, during 1999, and its Vice President,
Creative Services, from 1997 to 1998. Mr. Scott also served as Senior Vice
President, Account Director of Young & Rubicam Advertising, an advertising
agency, in 1996.
e. John B. Suddarth
Mr. Suddarth has been a Senior Vice President of WINC since April 12, 2001.
He was employed by AMF Bowling Products, Inc. as its Chief Operating Officer on
March 15, 2001. Prior to joining AMF, Mr. Suddarth was the Chief Operating
Officer of Morse Controls, a privately held controls company, from 1997 to 2000
and, from 1995 to 1997, Mr. Suddarth served as the Chief Operating Officer of
AMF Reece, Inc., a privately held industrial sewing machine company.
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3. Stabilizing Operations
Both before and after the Commencement Date, the Debtors have
taken actions to stabilize operations. The Debtors' management is actively and
regularly reaching out to its league and other bowling center customers and
vendors to assure them that these cases will not affect the Debtors' ability to
operate and honor trade terms on a going-forward basis. At the same time,
management has addressed and will continue to address the many emergencies and
other matters which are incidental to the commencement of complex Chapter 11
cases, including responding to a multitude of inquiries by employees, unsecured
creditors, the Creditors' Committee and its professionals, holders of Senior
Lender Claims and their professionals, and others.
In addition, the Debtors have moved quickly to ensure
liquidity during the pendency of these cases. On the Commencement Date, the
Debtors filed a motion seeking approval of a motion to obtain
debtor-in-possession financing from the DIP Lenders in an aggregate amount of up
to $75 million under the DIP Facility. The DIP Facility, which was the product
of extensive negotiations with Citibank, was approved on a final basis by the
Bankruptcy Court on August 8, 2001. The Debtors believe that establishing the
DIP Facility has been and will be viewed by other third parties, particularly
bowling products customers and vendors, as a means of providing stability and
improving cash flow and enhancing long term competitiveness of the Debtors. See
section VIII.4.b., "DIP Financing Motion," below. In addition, postpetition
financing has enabled the Debtors to (i) increase their available financial
resources, (ii) engender confidence in their vendors such that the Debtors were
and are able to purchase goods and services on normal trade terms, (iii) fund
the operations of certain Subsidiary Debtors during the summer months when such
operations generate lower cash flow, (iv) fund the payments set forth in their
first day orders, and (v) pay non-default rate interest under the Senior Lender
Agreements. As of August 28, 2001, there was approximately $5 million
outstanding under the DIP Facility.
4. First Day Motions
Together with their petitions for relief, the Debtors filed a
number of "first day" motions on the Commencement Date. In addition to these
motions seeking affirmative or injunctive relief (some of which are discussed
below), several sought administrative relief necessary to permit the Debtors to
operate in the Reorganization Cases. Capitalized terms used in this section and
not defined in this Disclosure Statement have the definitions that are used in
the applicable motion. The Debtors' first day motions included motions for
orders:
o establishing interim compensation procedures for professionals;
o authorizing the Debtors to mail initial notices and to file a list of
creditors in lieu of a creditor matrix;
o authorizing the retention of the Debtors' professionals and a noticing,
claims and Voting Agent;
o authorizing payment of prepetition sales and use taxes and continued
compliance with licensing and regulatory requirements;
o authorizing the continued use of the Debtors' existing bank accounts and
business forms;
o authorizing the joint administration of the Debtors' cases;
77
o authorizing the Debtors to satisfy prepetition claims held by certain
critical vendors, suppliers and foreign creditors;
o authorizing the Debtors to honor certain prepetition customer programs and
practices;
o authorizing the payment of certain prepetition employee obligations;
o authorizing the payment of prepetition common carrier, warehouse and
related obligations;
o approving the rejection of certain leases and executory contracts;
o the employment of certain ordinary course professionals and foreign
insolvency counsel;
o authorizing the Debtors to continue and pay premiums due under worker's
compensation and insurance policies;
o determining procedures governing adequate assurance of future performance
under executory contracts with utility companies;
o approving an administrative order limiting notice to certain parties;
o authorizing interim borrowings under the DIP Facility and the use of cash
collateral;
o authorizing the Debtors to maintain their existing cash management system;
and
o approving certain investment guidelines.
Each of these motions was granted by the Bankruptcy Court. Nothing in the Plan
will preclude the Reorganized Debtors from paying Claims that the Debtors were
authorized to pay under any Final Order entered by the Bankruptcy Court before
the Confirmation Date.
a. Critical Payments Motion
The Debtors sought and received an order of the Bankruptcy
Court authorizing the Debtors, in the exercise of their sound business judgment,
to:
(a) pay an amount not to exceed $6.13 million in prepetition
obligations owed to essential providers of goods and services, who
provided such goods and services prior to the Petition Date;
(b) honor certain obligations up to an aggregate of $1.9 million to
certain vendors with whom the Debtors placed purchase orders prior to the
Petition Date for goods that are scheduled to be delivered to the Debtors
after the Petition Date or alternatively, affirm or reissue prepetition
purchase orders to such vendors postpetition;
(c) pay up to an aggregate of $1.1 million on account of prepetition
obligations owed to any creditor that may seek to enforce its rights under
applicable foreign law, such that property of the estates is subject to
seizure, forfeiture, or diminution in value and such creditor is
practically immune from the reach of the automatic stay under section 362
of the Bankruptcy Code;
78
(d) honor certain obligations to certain vendors that the Debtors
placed purchase orders prior to the Commencement Date for goods scheduled
to be delivered to the Debtors after the Commencement Date; and
(e) pay all checks in respect of obligations described in paragraphs
(a) through (d) above that are in float as of the Commencement Date and
reissue such checks if they are inadvertently denied.
Payment of such expenses was designed to prevent disruption in
the Debtors' ordinary course business arrangements with major trade suppliers,
and to reduce the threat that such suppliers and other trade creditors will
cease doing business with the Debtors. Although the Debtors were authorized to
pay up to $9.13 million in prepetition claims pursuant to this motion, as of
August 1, 2001, only approximately $4.25 million in critical prepetition
payments had been made.
b. DIP Financing Motion
As discussed above, the Debtors received approval of a motion
to obtain financing and authorize the use of cash claimed as collateral by the
Senior Lenders ("Cash Collateral"). The DIP Facility consists of a
non-amortizing revolving credit facility in an aggregate principal amount of up
to $75 million (with a sublimit of $15 million for letters of credit). Proceeds
of the advances under the DIP Facility are to be or were used solely to (i)
provide financing for working capital, letters of credit, capital expenditures
and other general corporate purposes of the Debtors including, to the extent
permitted under the DIP Facility, their non-Debtor subsidiaries and (ii) pay
related transaction costs, fees and expenses. All postpetition advances will
bear interest, at the option of the Debtors, at one of the following rates:
o A rate per annum equal to the sum of (i) a margin of 1.5% and (ii) a
fluctuating interest rate based on the highest of (a) the applicable base
rate of Citibank as Administrative Agent for the DIP Lenders (the "DIP
Lender Administrative Agent"), (b) a rate based on the three week moving
average of applicable interest rates for certification of deposit
adjusted for reserve requirements, plus a premium of 50 basis points and
(c) the three week moving average of the estimated annual assessment rate
payable by Citibank to insure U.S. dollar deposits, as more fully set forth
in the DIP Facility (the "Base Rate").
o A rate per annum equal to the sum of (i) a margin of 2.5% per annum and
(ii) a variable rate based on the London interbank market rate applicable
two days before the borrowing, adjusted to account for specified reserve
requirements (the "Eurodollar Rate").
o Interest payments on advances based on the Base Rate will be made monthly
in arrears. Interest payments on advances based on the Eurodollar Rate will
be made on the last day of the applicable interest period.
o During an event of default, borrowings will bear interest at an additional
2% per annum.
In general terms, the Debtors secured their obligations under
the DIP Agreement with, among others:
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o first priority liens on and security interests in (subject to certain
specified permitted liens) all unencumbered property and interests, real
and personal, tangible and intangible, of the Debtors, including after
acquired property,
o first priority, senior priming liens on all collateral securing obligations
under the Senior Lender Agreements prior to the Commencement Date (the
"Prepetition Collateral") in accordance with section 364(d)(1) of the
Bankruptcy Code, and all existing liens on the Prepetition Collateral for
the benefit of the Senior Lenders are to be made subject and subordinate to
the perfected first priority senior liens to be granted to the DIP Lender
Administrative Agent, in each case subject and subordinate to the carve-out
described below.
o junior liens on all property (other than Prepetition Collateral) of the
Debtors that (a) was subject to valid and perfected liens in existence on
the Commencement Date, in accordance with section 364(c)(3) of the
Bankruptcy Code or (B) becomes subject to a valid lien perfected (but not
granted) after the Commencement Date to the extent such post-Petition Date
perfection in respect of prepetition claims is expressly permitted under
the Bankruptcy Code, and
The DIP Facility provides for a carve-out for payment of
certain administrative expenses in an amount not to exceed $2,500,000 in the
aggregate, which amount may be used by the Debtors after the occurrence and
during the continuance of a default or an event of default under the DIP
Facility, despite the security interests held for the benefit of the DIP Lenders
and the DIP Lender Administrative Agent's rights and superpriority claims under
the DIP Facility. The Debtors may use the carve-out to pay certain fees or
expenses specified in the DIP Facility.
The amount of fees and expenses payable under the carve-out
may not exceed $2,500,000 and the dollar limitation on fees and disbursements
excludes any retainer fees paid to the Borrower's professionals prior to the
Filing Date (the "Retainers") and will not be reduced by the amount of any
compensation and reimbursement of expenses paid prior to the occurrence of the
default or event of default in respect of which the Carve-Out is invoked or any
fees, expenses, indemnities or other amounts paid to the Administrative Agent,
the Lenders and their attorneys and agents under the agreement or otherwise.
However, in no event may the Debtors pay any fees or expenses from proceeds of
the DIP Agreement that are incurred in challenging the liens or claims of the
Prepetition Agent or the Senior Lenders, although, subject to the Carve-Out, the
professionals for the Committee may be paid (to the extent allowed by the Court)
fees and expenses incurred in analyzing such liens or claims.
The following measures were approved to adequately protect the
Senior Lenders against any diminution in the value of the prepetition collateral
that results from: (i) the use, sale or lease of the prepetition collateral
(including Cash Collateral), (ii) the imposition of the automatic stay, and
(iii) the priming of the liens on the prepetition collateral with the liens
granted in connection with the DIP Facility and under the order authorizing the
DIP Facility (the "DIP Order") on property of the Debtors' estates in favor of
the DIP Lender Administrative Agent and the DIP Lenders:
o the monthly payment of current, non-default rate interest and letter of
credit fees (including any such unpaid interest and fees that have accrued
as of the Commencement Date) due in accordance with the Senior Lender
Agreements;
80
o (a) valid, binding, enforceable and perfected replacement security
interests in all of the Debtors' right, title and interest in, to and under
the collateral to be provided under the DIP Facility and (b) claims
pursuant to section 507(b) of the Bankruptcy Code, subject in each case to
the qualifications and exceptions described in the DIP Order; and
o the current payment to the Administrative Agent of certain reasonable fees
and expenses described in the DIP order.
The DIP Order contains provisions through which the Debtors
have acknowledged the amount of their indebtedness as of the Commencement Date
under the Senior Lender Agreements, and that such indebtedness is secured by
liens in favor of the Senior Lenders on certain of the Debtors' real and
personal property located in the United States. In addition, the Debtors have
waived and released any right they may have had to challenge the validity of
such claims and liens.
Notwithstanding these acknowledgements and waivers, the DIP
Order provides that the Creditors' Committee may seek to (a) disallow the Senior
Lender Claims, (b) avoid any lien, security interest or collateral interest in
the assets of the Debtors claimed by the Senior Lenders, (c) otherwise obtain
any other relief of any type or nature whatsoever, legal or equitable against
the Senior Lenders, (d) otherwise recover from the Senior Lenders on account of
their relationship with the Debtors prior to the Commencement Date, or (e)
challenge the application of the monthly interest payments described above. The
Order provides that the Creditors' Committee shall have until October 7, 2001
within which to file an objection and commence an action. Absent such timely
objection or action, the Senior Lender Claim would be allowed as a secured claim
for all purposes in connection with the cases.
c. Employee Wage Motion
To retain valued employees and ensure the Debtors' ability to
continue operating with a minimal amount of disruption after the Commencement
Date, the Debtors sought an order of the Bankruptcy Court authorizing the
Debtors to honor in the ordinary course and/or pay prepetition claims relating
to unpaid compensation, reimbursable expenses, employee benefits, and paid time
off obligations, which include, among other items, wages, salaries, commissions,
compensation, union benefits, federal and state withholding taxes, payroll
taxes, vacation days, holiday pay, personal days, life insurance, medical
insurance benefits and premiums, tuition reimbursement, 401(k) contributions,
reimbursable expenses and other employee benefits (collectively, the
"Prepetition Employee Obligations"). The Debtors also obtained Bankruptcy Court
approval to take certain actions to ensure that certain social costs are
satisfied with respect to the Debtors' foreign employees (collectively, the
"Wage Motion").
Pursuant to the Wage Motion, the Debtors satisfied payroll
obligations of approximately $8.64 million, including, $7.9 million in wages and
salaries (net of employer-portion payroll taxes) to their approximately 15,020
employees, approximately $640,675 in Payroll Tax Obligations and approximately
$108,000 (before taxes) in commissions. In addition to paying payroll expenses,
pursuant to the Wage Motion, the Debtors made payments, including, but not
limited to, approximately (i) $1.1 million in connection with prepetition
obligations arising under their self-insured health plan, (ii) $360,000 to
reimburse employees for business expenses they incurred prepetition, (iii) $1.75
million to third parties in respect of amounts deducted from employees'
paychecks for items such as 401(k) plans, health care costs,
optional-life/dependent life, flexible medical savings accounts, dependent care
accounts, union dues, and (iv) $1.51 million in connection with foreign social
costs.
5. Retention and Severance Programs
To retain valued members of the Debtors' management, the
Debtors sought an order of the Bankruptcy Court authorizing the Debtors to
maintain several retention and severance programs, including: key manager
retention agreements for approximately 17 key management employees (the
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"Employee Retention Agreements"); an executive retention plan for Roland Smith,
the Debtors' Chief Executive Officer and Stephen E. Hare, the Debtors' former
Chief Financial Officer; the AMF US Employees Severance Plan for U.S.-based
employees who hold titles below the Director level; the AMF Senior Manager
Severance Plan for U.S.-based employees who are Director-level employees or
above, and who are generally not otherwise entitled to benefits under another
plan, program or individual agreement that provides severance benefits, and; a
discretionary bonus fund to provide for the payment of bonus awards, up to a
total of $100,000, to employees of the Debtor who are not key managers or senior
executives. The motion requesting approval of the severance and retention
programs described above was granted on July 26, 2001.
The retention agreements for the executive officers and the
Employee Retention Agreements provide for bonus payments in an amount equal to a
percentage of the employee's base salary (from 25 percent to 200 percent), based
on the employee's position with the Debtor and level of responsibility. One-half
of the retention bonuses were paid to employees before the Commencement Date. In
order to receive the balance of the retention bonus, the employee must remain
employed with the Debtors through the Effective Date.
Under the severance and other plans maintained by the Debtors,
including the AMF US Employees Severance Plan, the AMF Senior Manager Severance
Plan, and the Employment Retention Agreements (under which key managers are
eligible to receive severance benefits), the severance benefits range from a
minimum of four weeks of base salary (for employees below the Director level) up
to twelve months of base salary, benefit plan continuation for twelve months,
plus a pro-rated bonus for the year in which termination occurs (for the certain
senior executive employees of the Debtor). Following the Effective Date, the AMF
US Employees Severance Plan will be eliminated. After such date, employees below
the Director level will receive benefits under the general AMF severance policy,
which provides a severance benefit equal to one week of base salary for each
year of service with the Debtor, without a minimum benefit. Prior to receiving
benefits under the severance plans or agreements, each eligible employee must
execute a general release of claims against the Debtors.
In an effort to increase the competitiveness of the Debtors'
compensation package for employees above the Director level, which was
considered to be below market based on a study conducted by a
nationally-recognized consulting firm, the Debtors enhanced the compensation
package for such employees by adopting several additional welfare benefit plans
and programs. The additional plans and programs are incorporated in the AMF
Senior Manager Benefits Package. The more significant benefits provided under
the Senior Manger Benefits Package include, enhanced severance benefits through
the AMF Senior Manager Severance Plan, long-term disability and additional life
insurance coverage, a variable annuity and variable universal life insurance
program under which the Debtors provide a matching contribution (subject to
annual limits) and a tax "gross-up", based on the level of after-tax
contributions made by participants, an enhanced vacation policy, and for the
most senior employees of the Debtor, reimbursement of expenses incurred in
connection with financial planning, estate planning, and airline club
memberships (subject to annual limits).
6. Senior Executive Employment Agreements
In 1999, BINC entered into an employment agreement with Roland
Smith, BINC's Chief Executive Officer, and Stephen Hare, BINC's former Chief
Financial Officer. In 2000, BINC assigned its rights and obligations under the
employment agreements for Messrs. Smith and Hare to WINC and certain Debtors
that are subsidiaries of WINC.
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The Debtors sought an order of the Bankruptcy Court
authorizing the Debtors to assume the employment agreements with Messrs. Smith
and Hare and the Employee Retention Agreements. The motion was granted on July
26, 2001. On August 30, 2001, Stephen Hare resigned as an officer and director
of BINC, WINC and Holdings and Christopher Caesar was appointed as Chief
Financial Officer and Vice President in his place.
7. Cash Management Motion
The Debtors sought and obtained authorization to continue the
management of their cash receipts and disbursements substantially in the manner
in which they were handled immediately before the Commencement Date.
WINC's domestic cash management system is generally organized
by business line and consists primarily of two linked networks of accounts, one
maintained at First Union National Bank ("FUNB") and one at Citibank. Both the
FUNB and Citibank networks resemble a pyramid. Generally, monies generated by
WINC's bowling centers are initially deposited into one of many local deposit
accounts. On a daily basis, these funds are transferred to one of several
intermediate concentration accounts, which each relate to a particular line of
business. Subsequently, funds are swept from the intermediate concentration
accounts, which are maintained by Subsidiary Debtors, into one of two primary
concentration accounts maintained by WINC, which concentrate funds from the FUNB
and Citibank networks, respectively. As set forth above, it is these
concentration accounts, which are maintained at FUNB and Citibank (the "Citibank
Concentration Account"), respectively, that enable WINC to serve as the primary
collection and disbursement agent for its subsidiaries.
Each of WINC's international operations has their own network
of bank accounts, which they use to collect receivables and pay disbursements.
Excess monies generated by these operations are wired, on a periodic basis, into
one of several accounts maintained by WINC in the United Kingdom and
occasionally into the Citibank Concentration Account. From time to time, one or
more of WINC's foreign branches (who are Subsidiary Debtors or Foreign
Subsidiaries) requires an advance of funds for use in its operations. Although
such operations are generally self sufficient on an annual basis, they do not
retain their excess cash. Rather, in accordance with the ordinary and customary
cash management practices, such cash is concentrated elsewhere within WINC's
cash management system. On such occasions, either AMF UK, AMF Bowling Products,
Inc. ("AMF Products"), or WINC wires money to such branch or subsidiary. Such
transfers are merely short term arrangements, and frequently are made under
circumstances in which the transferee has underestimated its cash needs and has
upstreamed more funds than it should have. Historically, although AMF Products
generally provides as much money to AMF UK and WINC as it consumes annually by
way of payroll, vendor obligations and other business expenses, at certain
points during the year, cash generated by the Debtors' bowling centers business
is used for AMF Products' operations.
The foregoing practices directly and indirectly maintain and
preserve WINC's enterprise value. Moreover, WINC's operations and the
preservation of their respective asset values depend on, among other things,
WINC's ability to continue to use these cash management practices because,
absent the present system, the Debtors and their Foreign Subsidiaries would not
be able to track their receipts and disbursements as there is no other mechanism
in place that would enable each to manage and deploy their cash independently
from each other.
B. Case Administration
1. Bar Date
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In accordance with Bankruptcy Rules 3003(c) and 9029, by order
dated July 5, 2001 the Bankruptcy Court established September 24, 2001 (the "Bar
Date") as the final date for filing proofs of claims against the Debtors,
subject to certain exceptions. Pursuant to Bankruptcy Rule 3003(c)(2), any
creditor: (a) whose Claim (i) was not scheduled by the Debtors or (ii) was
scheduled as disputed, contingent or unliquidated, and (b) who failed to file a
proof of claim on or before the Bar Date, will not be treated as a creditor with
respect to that Claim for purposes of voting on the Plan or receiving a
distribution under the Plan.
The Debtors may object to all Claims filed after the Bar Date
and to duplicate, excessive or otherwise meritless Claims.
2. Exclusivity
The Debtors filed the Plan on August 31, 2001. Under section
1121 of the Bankruptcy Code, the Debtors have the exclusive right to obtain
acceptances relating to the Plan through and including 180 days from the
Commencement Date. The Debtors reserve its right to seek an extension of its
time to obtain acceptances of the Plan.
3. Schedules and Statement of Financial Affairs
The Debtors filed their Schedules of Assets and Liabilities,
lists and Statement of Financial Affairs on August 3, 2001. The Debtors reserve
their rights to amend such Schedules, lists and Statement of Financial Affairs
as may be necessary.
4. Information and Estimates
In their Schedules of Assets and Liabilities, and statement of
financial affairs and executory contracts, the Debtors estimated the approximate
aggregate allowed amounts of Claims, and the projected recoveries thereon under
the Plan, as set forth below. These estimates are preliminary and tentative
given the limited review and analysis undertaken to date.
These amounts represent estimates by the Debtors based on
current information only. The Debtors make no representation as to the extent to
which these estimates may ultimately prove accurate in light of actual claims
and the resolution of claims disputes. For information regarding the limitations
on and uncertainties of these estimates, see section VI.B, "Financial
Projections and Valuation Analysis," above:
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Class or Type of Claims Estimated Aggregate Allowed Amounts
----------------------- -----------------------------------
DIP Lender Claims....................................... $o/2/
Administrative Expense Claims........................... $o
Fee Claims.............................................. $o/3/
Priority Non-Tax Claims................................. $o
Other Secured Claims.................................... $o
Unsecured Claims........................................ $o
Senior Lender Claims.................................... $
Impaired Unsecured Claims............................... $o
Senior Subordinated Note Claims......................... $o
Convenience Claims...................................... $o
Interdebtor Claims...................................... $o
AMF Affiliates Claims................................... $o
Common Stock / Equity Interests......................... $o
Existing Securities Law Claims.......................... $o
510(c) Claims........................................... $o
5. Preferences and Fraudulent Conveyances
Under the Bankruptcy Code, a debtor may seek to recover, through
adversary proceedings in the bankruptcy court, certain transfers of the debtor's
property, including payments of cash, made while the debtor was insolvent during
the ninety (90) days immediately before the commencement of the bankruptcy case
(or, in the case of a transfer to or on behalf of an "insider," one year before
the commencement of the bankruptcy case) in respect of antecedent debts to the
extent the transferee received more than it would have received on account of
such preexisting debt had the debtor been liquidated under chapter 7 of the
Bankruptcy Code. Such transfers include cash payments, pledges of security
interests or other transfers of an interest in property. In order to be
preferential, such payments must have been made while the debtor was insolvent;
debtors are rebuttably presumed to have been insolvent during the 90-day
preference period. The Bankruptcy Code's preference statute can be very broad in
its application because it allows the debtor to recover payments regardless of
whether there was any impropriety in such payments.
However, there are certain defenses to such claims. For example,
transfers made in the ordinary course of the debtor's and the transferee's
business according to ordinary business terms are not recoverable. Furthermore,
if the transferee extended credit contemporaneously with or subsequent to the
transfer, and before the commencement of the bankruptcy case, for which the
transferee was not repaid, such extension constitutes an offset against an
otherwise recoverable transfer of property. If a transfer is recovered by a
debtor, the transferee has a general unsecured claim against the debtor to the
extent of the recovery.
Under the Bankruptcy Code and under various state laws, a debtor may
also recover or set aside certain transfers of property (fraudulent transfers),
including the grant of a security interest in property, made while the debtor
was insolvent or which rendered the debtor insolvent or undercapitalized to the
extent that the debtor received less than reasonably equivalent value for such
transfer.
- -------
/2/ Subject to the actual amounts of borrowing under or letters of credit drawn
in connection with the DIP Facility.
/3/ Including success fees of Blackstone as set forth in its engagement letter,
which was filed with the Bankruptcy Court in connection with the Debtors'
application to retain and employ Blackstone.
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The Debtors have performed a review to determine whether any
fraudulent conveyances were made. The Debtors currently are not aware of any
claims, and believe there are no claims against any party for a fraudulent
conveyance that are likely to succeed. The Debtors believe, without thorough
investigation, that there are valid defenses to most, if not all, transfers that
may constitute preferences under the Bankruptcy Code.
6. Representation of the Debtor
The Debtors have retained for purposes of representation of the
Debtors in the Reorganization Cases the law firms of Willkie Farr & Gallagher,
New York, New York, and McGuireWoods LLP, Richmond, Virginia, as bankruptcy
co-counsel, and The Blackstone Group, New York, New York, as financial advisors,
and Arthur Andersen LLP, Richmond, Virginia, as tax consultants and auditors.
7. Representation of Other Parties in Interest
The Creditors' Committee has retained the law firms of Debevoise &
Plimpton, New York, New York and Troutman Sanders Mays & Valentine LLP,
Richmond, Virginia, as legal counsel and Houlihan Lokey Howard and Zukin
Capital, New York, New York, as its financial advisor (which retention has not
yet been approved by the Bankruptcy Court).
IX. CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes certain United States federal
income tax consequences of the implementation of the Plan to the Debtors and
certain holders of Claims and Equity Interests. The following summary does not
apply to holders whose Claims or Equity Interests are entitled to reinstatement
or payment in full in cash under the Plan.
The following summary is based on the Internal Revenue Code of 1986
(the "Code"), Treasury regulations promulgated therunder, judicial decisions and
published rulings and pronouncements of the Internal Revenue Service ("IRS") as
in effect on the date hereof. Changes in these rules, or new interpretations of
these rules, may have retroactive effect and could significantly affect the
federal income tax consequences described below.
The federal income tax consequences of the Plan are complex and
subject to significant uncertainties. Also, the tax consequences to holders of
claims and interests may vary based on the individual circumstances of each
holder. The Debtors have not requested a ruling from the IRS or an opinion of
counsel with respect to any of the tax aspects of the Plan. Thus, no assurance
can be given as to the interpretation that the IRS will adopt. In addition, this
summary does not address foreign, state or local tax consequences of the Plan,
and it does not purport to address the federal income tax consequences of the
Plan to special classes of taxpayers, such as, without limitation, foreign
taxpayers, broker-dealers, banks, insurance companies, financial institutions,
small business investment corporations, regulated investment companies,
tax-exempt organizations, investors in passthrough entities, litigation
claimants, employees of the Debtors with claims relating to their employment, or
stockholders who acquired the stock through the exercise of an employee stock
option or otherwise as compensation. This discussion assumes that holders hold
their Claims and Equity Interests, and will hold any property received in
exchange for such Claims and Equity Interests, as "capital assets" within the
meaning of Code section 1221. The tax consequences to holders of Claims or
Equity Interests may vary based on the specific characteristics and
circumstances of the holders.
86
Accordingly, the following summary of certain federal income tax
consequences is for informational purposes only and is not a substitute for
careful tax planning and advice based on the individual circumstances pertaining
to the holder of a Claim. All holders of Claims or Equity Interests are urged to
consult their own tax advisors in determining the federal, state, local and
other tax consequences to them of the plan.
A. Tax Consequences to Creditors
1. General
a. Tax Securities
The tax consequences of the Plan to a holder of a claim may depend in
part upon whether such claim is based on an obligation of the Debtors that
constitutes a "security" for federal income tax purposes. The determination of
whether a debt obligation constitutes a security for federal tax purposes is
complex and depends on the facts and circumstances surrounding the origin and
nature of the claim. Generally, obligations arising out of the extension of
trade credit have been held not to be tax securities, while corporate debt
obligations evidenced by written instruments with original maturities of ten
years or more have been held to be tax securities. It is uncertain whether the
Claims will be considered securities for federal tax purposes and holders are
advised to consult their tax advisors with respect to this issue.
b. "Fair Market Value"
For tax purposes, the fair market value of the New AMF Common Stock
and New Warrants will be their actual fair market value upon issuance. The fair
market value of the New AMF Notes and the Senior Lender Facility Notes (if any)
will be their respective "issue price," as defined in the Code. The "issue
price" of any such note should be its "stated principal amount" (generally, the
aggregate of all payments due under the note, excluding stated interest), if
neither the note nor the Claim for which it is exchanged is considered to be
"publicly traded" within the meaning of the original issue discount ("OID")
rules of the Code within a short period before or after the Effective Date of
the Plan. Otherwise, such issue price will be its actual fair market value, as
determined by such public trading. For this purpose, "stated interest" does not
include interest unless it is unconditionally payable in cash or other property
(other than debt instruments of the issuer) at least annually at a single fixed
rate (or certain qualified floating rates). The OID rules of the Code define
"publicly traded" to include appearing on a "quotation medium" that provides a
reasonable basis to determine fair market value by disseminating either recent
price quotations of identified brokers, dealers or traders, or actual prices of
recent sales transactions. As no transfer restrictions are contemplated for the
New AMF Notes and the Senior Lender Facility Notes, the Debtors cannot assure
you that they will not be considered "publicly traded."
c. Character of Gain or Loss
The character of any gain or loss as ordinary or capital with respect
to a Claim, or with respect to the disposition of stock or a security received
in respect of a Claim, will depend on a number of factors, including, without
limitation,
o the origin and nature of the Claim or Equity Interest,
o the tax status of the holder of the Claim or Equity Interest,
o whether the Claim or Equity Interest is a capital asset in the hands
of the holder, and
87
o the extent to which the holder previously claimed a loss, bad debt
deduction or charge to a reserve for bad debts with respect to the
Claim or Equity Interest.
If gain or loss recognized by a holder of a Claim or Equity Interest
is capital gain or loss, it will be long-term if the holder held it for more
than one year.
Special considerations apply to holders that acquired their Claim or
Equity Interest at a discount subsequent to their issuance (see "Market
Discount" below), or when interest was in default. The tax consequences of the
receipt of cash and property that is attributable to accrued but unpaid interest
is discussed below in the section entitled "Consideration Allocable to
Interest." Each holder is urged to consult its tax advisor as to the application
of these factors to its own particular circumstances.
d. Consideration Allocable to Interest
A holder of a Claim that receives a distribution under the Plan with
respect to its Claim will recognize ordinary income to the extent it receives
cash or property in respect of interest (including original issue discount that
has accrued during the time that the holder has held such Claim) that has not
already been included by the holder in income for federal income tax purposes
under its method of accounting. In the event that the cash and other property
allocable to interest is less than the amount previously included as interest in
the holder's federal income tax return, the discharged portion of interest may
be deducted in the taxable year in which the Effective Date occurs. The extent
to which consideration distributed under the Plan is allocable to interest is
uncertain, and holders of Claims are urged to consult their own tax advisors
concerning that subject.
e. Market Discount
Generally, a "market discount" bond is one acquired after its original
issuance for less than the issue price of such bond plus the aggregate amount,
if any, of original issue discount includible in the income of all holders of
such bond before such acquisition. Generally, gain realized on the disposition
of a market discount bond (or on the disposition of property exchanged for such
bond in certain non-taxable exchanges) will be ordinary income to the extent of
"accrued market discount" at the time of such disposition (determined using
either constant interest or ratable daily accrual). The market discount rules
will also apply in the case of stock or a security acquired on original issuance
under a non-taxable exchange for a market discount obligation.
f. Original Issue Discount
If the New AMF Notes or any Senior Lender Facility Notes to be issued
under the Plan or the Senior Lender Claims for which they will be exchanged are
"publicly traded" within the meaning of the OID rules, the New AMF Notes and any
such Senior Lender Facility Notes may have significant amounts of OID. The
amount of OID would equal the difference between their "stated redemption price
at maturity" (as such term is defined in the Code) and their "issue price"
(determined as discussed above in the section on "Fair Market Value"). In
general, a holder of a debt instrument with OID must include such OID in its
income on a constant yield to maturity basis over the term of the instrument.
The rules and regulations governing the calculation and taxation of OID are
complex, and holders of Senior Lender Claims are urged to consult their tax
advisors with regard to the tax consequences to them of owning New AMF Notes or
Senior Lender Facility Notes with OID.
88
g. Backup Withholding
Under the Code, interest, dividends and other "reportable payments"
may, under certain circumstances, be subject to "backup withholding". Various
claimants, such as corporations, are exempt from backup withholding.
Backup withholding generally applies if the payee:
o fails to furnish its social security number or other taxpayer
identification number (a "TIN");
o furnishes an incorrect TIN;
o fails to properly report interest or dividends; or
o under certain circumstances, fails to provide a certified statement,
signed under penalty of perjury, that the TIN provided is its
correct number and that it is not subject to backup withholding.
2. Treatment of Certain Creditors
a. Senior Lender Claims
As discussed in section I.D.3, "Summary of Distributions under the
Plan" of this Disclosure Statement, under the Plan, each holder of Allowed
Senior Lender Claims will receive, in complete settlement, satisfaction and
discharge of its Class 2 Claim:
o its pro rata share of the Senior Lender Cash Payment which will be
zero dollars ($0) if the Exit Facility is the Senior Lender
Facility;
o if the Exit Facility is the Senior Lender Facility, its pro rata
share of the Senior Lender Facility Notes;
o its pro rata share of the 10,000,000 shares of the New AMF Common
Stock to be issued under the Plan; plus
o its pro rata share of the New AMF Notes.
[DISCUSSION OF TAX IMPLICATIONS OF FEES PAYABLE TO SENIOR LENDERS TO FOLLOW]
If the Senior Lender Claims are securities, the exchange of a Senior
Lender Claim will constitute a recapitalization. An exchanging holder would not
recognize any loss realized on the exchange. If the holder realizes a gain on
the exchange, the holder must recognize such gain to the extent of the sum of
(1) the amount of cash, (2) if the New AMF Notes are not securities, the fair
market value of such notes and (3) if the Senior Lender Facility Notes are not
securities, the fair market value of such notes received by the holder. The
holder's aggregate basis in (1) its New AMF Common Stock and (2) the notes, if
any, that are securities will equal its basis in its Senior Lender Claim less
the sum of the amount of cash and the fair market value of the notes that are
not securities received in the exchange. The holder's basis in the notes, if
any, that are not securities will be their fair market value. The holder's
aggregate basis in the New AMF Common Stock and the securities will be allocated
89
in accordance with their fair market values. The holder's holding period in the
New AMF Common Stock, and in the notes, if any, that are securities, would
include the holder's holding period in the Senior Lender Claim exchanged
therefor. The holder's holding period in the notes, if any, that are not
securities, would begin on the day following the exchange.
If the Senior Lender Claims are not securities, the exchange of a
Senior Lender Claim would be a fully taxable transaction. The holder would
recognize any gain or loss realized on the exchange. The holder's basis in all
property received in the exchange would equal its fair market value. Its holding
period in such property would begin on the day following the exchange.
b. Senior Subordinated Note Claims, Unsecured Claims and Tort
Claims
Under the Plan, holders of Senior Subordinated Note Claims, Unsecured
Claims and Tort Claims will receive the New Warrants.
If the Claim exchanged by the holder is a security, the exchange would
be a recapitalization. The exchanging holder would not recognize any gain or
loss realized on the exchange. The holder's aggregate basis in the New Warrants
will equal its basis in the exchanged Claim. The holder's holding period in the
New Warrants would include its holding period in the exchanged Claim.
If the Claim exchanged by the holder is not a security, the exchange
would be fully taxable. An exchanging holder would recognize any gain or loss
realized on the exchange. The holder's basis in its New Warrants would equal
their fair market value. The holder's holding period in the New Warrants would
begin on the day after the exchange.
B. Tax Consequences to Equity Holders
The Plan contemplates the cancellation of the common stock held by
BINC and Holdings in Holdings and WINC, respectively, without consideration.
Holders of Holdings' and WINC's Common Stock should therefore recognize on the
Effective Date a capital loss equal to their basis in Holdings' and WINC's
Common Stock.
C. Tax Consequences to the Debtors
1. Cancellation of Debt
In general, the Code provides that a taxpayer must include in gross
income the amount of any cancellation of indebtedness ("COI") income realized
during the tax year, except to the extent the payment of the discharged debt
would have given rise to a tax deduction. COI income is the amount by which the
indebtedness discharged exceeds the cash and the fair market value of property
given in exchange therefor. Such COI income is not included in taxable income,
however, where the cancellation of indebtedness is accomplished through a
bankruptcy plan approved by the court in a case under the Bankruptcy Code.
A debtor in a bankruptcy case generally must reduce its tax
attributes, such as NOLs, tax credits, capital loss carryforwards and tax basis
in its assets, by any such excluded COI income, as of the beginning of the
taxable year following the year in which the COI income is realized. This tax
attribute reduction rule is subject to certain exceptions, such as where the tax
basis of the Debtors' assets is less than the Debtors' continuing liabilities
(unless an election is made to reduce tax basis of depreciable property rather
than reducing other tax attributes). The Debtors believe that the amount of COI
90
income will be substantial, but the precise amount of COI income, and the
resulting tax attribute reduction of the Debtors, will depend on the total value
of the New AMF Notes, Senior Lender Facility Notes, New AMF Common Stock and New
Warrants given in exchange for the indebtedness of the Debtors, determined as
described above in the section on "Fair Market Value."
2. Effects on Net Operating Loss Carryforwards and Other Tax
Attributes
a. Reduction of Tax Attributes
BINC is the parent of an affiliated group of corporations, including
Holdings, WINC and certain subsidiaries of WINC, which files a consolidated
federal income tax return. The appropriate methodology for applying the
attribute reduction described above to an affiliated group filing a consolidated
federal income tax return is uncertain, and, in addition, the Debtors may be
entitled to make certain elections that will affect attribute reduction. The
Debtors will determine the appropriate methodology and elections under their
interpretation of the law as in effect when the Debtors' tax returns are filed.
The Debtors cannot assure you that the IRS will agree with the methodology
chosen by the Debtors. Accordingly, the NOLs of the Debtors may be substantially
reduced or even eliminated. Other tax attributes may also be reduced. To the
extent that asset basis is reduced, depreciation or amortization of assets would
also be reduced, and gain recognized (and therefore tax imposed) in connection
with a disposition of assets may be increased.
b. Code Section 382--In General
Code section 382 provides generally that corporations that undergo an
"ownership change" may be limited in the amount of existing tax attributes,
including NOLs, that can be used to offset income generated by the corporation
after the date of the ownership change, unless an exception under Code section
382(l)(5) applies. The Debtors intend to elect not to have the provisions of
Code section 382(l)(5) apply to them. Stated simply, an ownership change occurs
when aggregate changes in stock ownership by 5 percent shareholders exceed 50
percentage points by value over a three-year "testing period." Following an
ownership change, the annual amount of income that may be offset by the
corporation's NOLs after the ownership change generally will be limited to an
amount equal to the sum of the equity value of the corporation immediately
before the ownership change (but, under Code section 382(l)(6), including any
increase in value resulting from any surrender or cancellation of indebtedness
under the chapter 11 case), multiplied by the long-term tax-exempt rate then in
effect. This section 382 limitation may be increased by certain "recognized
built-in gains" triggered during a five year "recognition period" beginning on
the ownership change date. Certain "recognized built-in losses," including
certain deductions, triggered during the recognition period may be limited in
the same manner as if such loss were an NOL existing as of the ownership change.
c. Application of Code Section 382 to the Debtors
Any NOL remaining after the attribute reduction discussed above would
be subject to the general section 382 limitation. As a result, annual usage of
the NOL would be limited to the equity value of the Debtors immediately before
the Effective Date (including, under Code section 382(l)(6), any increase in
value resulting from the cancellation of any claims under the Plan), multiplied
by the long-term tax-exempt rate in effect as of the Effective Date. The Debtors
may be allowed to increase such limitation by certain built-in gains realized
during the five year recognition period following the change date. In addition,
certain "recognized built-in losses" realized during the recognition period may
be subject to the Debtors' Code section 382 limitation as if they were NOLs.
Specifically, amortization of intangibles, and possibly depreciation of tangible
91
assets, may be limited during the five year "recognition period" following the
Effective Date. The extent of such limitation depends on a number of factual and
legal uncertainties, and, accordingly, the extent of any such limitation cannot
be determined at this time.
X. PROCEDURES FOR DISTRIBUTIONS UNDER THE PLAN
A. Distribution Record Date
As of the close of business on the Distribution Record Date, the
various transfer registers for each of the Classes of Claims or Equity Interests
as maintained by the Debtors, or their respective agents, will be deemed closed,
and there will be no further changes in the record holders of any of the Claims
or Equity Interests. The Debtors will have no obligation to recognize any
transfer of the Claims or Equity Interests that occur on or after the
Distribution Record Date. The Debtors will be entitled to recognize and deal for
all purposes under the Plan only with those record holders stated on the
transfer ledgers as of the close of business on the Distribution Record Date, to
the extent applicable.
B. Disbursing Agent
The Debtors may designate an entity or entities to serve as Disbursing
Agent in connection with distributions under the Plan or may themselves serve as
Disbursing Agent. The Disbursing Agent will initially distribute and deliver all
of the property to be distributed under the Plan, including, without limitation,
the cash, New AMF Common Stock, New AMF Notes and the New Warrants.
C. Date of Distributions
Unless otherwise provided in the Plan, any distributions and
deliveries to be made under the Plan will be made on the Effective Date or as
soon thereafter as is practicable.
D. Distributions to Classes 2, 4 and 6
On the Effective Date, the Disbursing Agent will distribute the Senior
Lender Distribution directly to Citibank, N.A., as administrative agent under
the Senior Lender Agreements, for further distribution to individual holders of
the Senior Lender Claims in accordance with the Senior Lender Agreements.
On the Initial Distribution Date, the Disbursing Agent will distribute
the New Warrants allocable to Allowed Claims held by members of Classes 4 and 6.
To calculate the amount of New Warrants to be distributed to holders of Allowed
Claims in Class 4, on the Initial Distribution Date, all Disputed Claims in
Class 4 will be treated as though such Claims will be Allowed Claims in the
amounts asserted or provided in the Estimation Order, as applicable.
If the amount of any Disputed Claim exceeds the amount of the Claim
that is ultimately Allowed, any New Warrants reserved for issuance with respect
to those Disputed Claims because of such excess will be issued and distributed
pro rata to holders of Allowed Claims in such Class pursuant to a Catch-up
Distribution. The Disbursing Agent will periodically distribute New Warrants to
the holders of Disputed Claims that become (in whole or in part) Allowed Claims
in an amount equal to the amount of New Warrants that would have been
distributed as of such date to such holder in respect of such Allowed Claim had
it been an Allowed Claim on the Initial Distribution Date. The Disbursing Agent
will have the right to determine the timing of the Catch-up Distributions.
92
E. Distribution to Class 5
On the Final Distribution Date, the Disbursing Agent will distribute
the New Warrants reserved for issuance in the Tort Claims Reserve, pro rata to
the holders of Allowed Tort Claims, to the extent that each holder's Tort Claim
is not an Insured Claim. Notwithstanding the value of individual Allowed Tort
Claims, in no event will the Disbursing Agent distribute an aggregate amount of
New Warrants to holders of Allowed Tort Claims in excess of the amount reserved
for issuance in the Tort Claims Reserve.
That portion of each Allowed Tort Claim that is an Insured Claim will
be paid solely and exclusively: (i) from the proceeds of insurance relating to
such Insured Claim as and when such proceeds are received; or (ii) by the
applicable insurance carrier to the extent of such insurance.
F. Surrender of Instruments
As a condition to receiving any distribution under the Plan, each
holder of a Claim represented by an instrument, other than a Senior Lender
Claim, including notes and certificates, must surrender such instrument held by
it to the Disbursing Agent or its designee accompanied by a letter of
transmittal substantially in the form set forth in the Plan Supplement. Any
holder that fails to (i) surrender such instrument or (ii) execute and deliver
an affidavit of loss and/or indemnity reasonably satisfactory to the Disbursing
Agent and furnish a bond in form, substance, and amount reasonably satisfactory
to the Disbursing Agent before the first anniversary of the Effective Date shall
be deemed to have forfeited all rights and Claims and may not participate in any
distribution under the Plan in respect of such Claims. Any distribution so
forfeited shall become the sole and exclusive property of Reorganized AMF.
G. Unclaimed Distributions
Subject to Bankruptcy Rule 9010, all distributions to any holder of an
Allowed Claim other than a holder of an Allowed Senior Lender Claim, shall be
made at the address of such holder as set forth on the Schedules filed with the
Bankruptcy Court or on the books and records of the Debtors or their agents,
unless the Debtors have been notified in writing of a change of address,
including, without limitation, by the filing of a proof of claim or interest by
such holder that contains an address for such holder different from the address
reflected on such Schedules for such holder. All distributions to any holder of
an Allowed Senior Lender Claim shall be made via wire transfer to Citibank,
N.A., as Administrative Agent under the Senior Lender Agreements. In the event
that any distribution to any holder is returned as undeliverable, no
distribution to such holder shall be made unless and until the Disbursing Agent
has been notified of the then current address of such holder, at which time or
as soon as reasonably practicable thereafter such distribution shall be made to
such holder without interest; provided, that, such distributions shall be deemed
unclaimed property under section 347(b) of the Bankruptcy Code at the expiration
of one (1) year from the Effective Date. After such date, all unclaimed property
or interest in property shall revert to Reorganized AMF, and the Claim of any
other holder to such property or interest in property shall be discharged and
forever barred. The Reorganized Debtors and the Disbursing Agent shall have no
obligation to attempt to locate any holder of an Allowed Claim other than by
reviewing their books and records (including any proofs of claim filed against
the Debtors).
93
H. Treatment of Disputed, Contingent and Unliquidated Claims
1. Characterization of Disputed Claims
Under section 1111(a) of the Bankruptcy Code, a proof of claim is
deemed filed under section 501 of the Bankruptcy Code in the amount listed in
the schedules filed by the debtor under applicable sections of the Bankruptcy
Code, unless the claim is listed on the schedules as disputed, contingent or
unliquidated. A disputed, contingent or unliquidated claim must be asserted by
its holder, or by an indenture trustee representing that holder, through a
timely filing of a proof of claim. If a proof of claim is not filed in a timely
manner, the claim shall be deemed under the Plan to be barred or disallowed.
2. Resolution of Contested Claims
Other than with respect to Fee Claims, only the Reorganized Debtors
shall be entitled to object to Claims. Any objections to Claims shall be served
and filed on or before the later of (i) one hundred twenty (120) days after the
Effective Date, (ii) thirty (30) days after a request for payment or proof of
Claim is filed and properly served upon the Debtors or (iii) such other date as
may be fixed by the Bankruptcy Court, whether fixed before or after the date
specified in clause (i), above.
XI. ADDITIONAL INFORMATION
The Debtors are subject to the information requirements of the
Exchange Act and in accordance therewith file reports and other information with
the Securities and Exchange Commission. Any statements contained in this
Disclosure Statement concerning the provisions of any document are not
necessarily complete, and in each instance reference is made to the copy of such
document for the full text thereof. Each such statement is qualified in its
entirety by such reference. Certain documents referred to in this Disclosure
Statement have not been attached as exhibits because of the impracticability of
furnishing copies thereof to all of the Debtors' creditors and equity security
holders. All of the exhibits to the Plan, the Plan Supplement and to this
Disclosure Statement are available for inspection by contacting the Voting
Agent.
94
XII. CONCLUSION
For all of the reasons set forth in this Disclosure Statement, the
Debtors believe that the confirmation and consummation of the Plan is preferable
to all other alternatives. Consequently, the Debtors urge all holders of Classes
2, 3, 4, 5, 6 and 9 Claims to vote to ACCEPT the Plan, and to duly complete and
return their ballots so that they will be ACTUALLY RECEIVED on or before 5:00
p.m. Eastern time on ____________ ____, 2001.
Dated: Richmond, Virginia
August 31, 2001
AMF BOWLING WORLDWIDE, INC.
By:
------------------------------------
Name:
Title:
AMF GROUP HOLDINGS INC.
By:
------------------------------------
Name:
Title:
AMF BOWLING HOLDINGS INC.
By:
------------------------------------
Name:
Title:
AMF BOWLING PRODUCTS, INC.
By:
------------------------------------
Name:
Title:
AMF BOWLING CENTERS HOLDINGS INC.
By:
------------------------------------
Name:
Title:
AMF WORLDWIDE BOWLING CENTERS
HOLDINGS INC.
By:
------------------------------------
Name:
Title:
95
AMF BOWLING CENTERS, INC.
By:
------------------------------------
Name:
Title:
AMF BEVERAGE COMPANY OF OREGON, INC.
By:
------------------------------------
Name:
Title:
AMF BEVERAGE COMPANY OF W. VA., INC.
By:
------------------------------------
Name:
Title:
BUSH RIVER CORPORATION
By:
------------------------------------
Name:
Title:
KING LOUIE LENEXA, INC.
By:
------------------------------------
Name:
Title:
300, INC.
By:
------------------------------------
Name:
Title:
AMERICAN RECREATION CENTERS, INC.
By:
------------------------------------
Name:
Title:
96
MICHAEL JORDAN GOLF COMPANY, INC.
By:
------------------------------------
Name:
Title:
MJG - O'HARE, INC.
By:
------------------------------------
Name:
Title:
AMF BOWLING CENTERS (AUST.)
INTERNATIONAL INC.
By:
------------------------------------
Name:
Title:
AMF BOWLING CENTERS (HONG KONG)
INTERNATIONAL INC.
By:
------------------------------------
Name:
Title:
AMF BOWLING CENTERS INTERNATIONAL INC.
By:
------------------------------------
Name:
Title:
AMF BCO-UK ONE, INC.
By:
------------------------------------
Name:
Title:
AMF BCO-UK TWO, INC.
By:
------------------------------------
Name:
Title:
97
AMF BCO-FRANCE ONE, INC.
By:
------------------------------------
Name:
Title:
AMF BCO-FRANCE TWO, INC.
By:
------------------------------------
Name:
Title:
AMF BOWLING CENTERS SPAIN INC.
By:
------------------------------------
Name:
Title:
AMF BOWLING MEXICO HOLDINGS, INC.
By:
------------------------------------
Name:
Title:
BOLICHES AMF, INC.
By:
------------------------------------
Name:
Title:
98
EXHIBIT A
Plan of Reorganization
[ENCLOSED HEREWITH]
EXHIBIT B
Non-Debtor Subsidiaries
AMF Bowling Products International B.V.
AMF Bowling India Private Limited
AMF Bowling Poland Sp.zo.o
RQP Ltd.
Broadway-Grand Plaza Associates
Fair Lanes Edgewood Restaurant, Inc.
AMF Catering Services Pty. Ltd.
AMF Bowling
AMF Bowling Augsburg GmbH
Gravesend Bowling Limited
Channel Holdings Limited
Pentagon Bowling Limited
AMF Bowling Products, LLC
AMF Bowling France SNC
AMF Bowling de Paris SNC
AMF Bowling de Lyon La Part Dieu SNC
Societe Anonyme du Bowling de Montparmasse
Boliches AMF y Compania
Operadora Mexicana de Boliches, S.A.
Promotora de Boliches, S.A. de C.V.
Immuebles Obispado S.A.
Immuebles Minerva S.A.
Boliches Mexicanos, S.A.
AMF International BCO Holdings B.V.
Hong Leong-AMF Leisure Holdings Ptd. Ltd.
Hong Leong-AMF Bowling (Tianjin) Co., Ltd.
AMF Bowling LTDA
AMF Bowling Brasil S.A.
Madeira Bowling Investments SGPS Sociedade Unipessol. LTDA
AMF Playcenter S.A.
AMF Bowling
AMF Bowling France
EXHIBIT C
Members of Creditors Committee
<s><c>
New England Plastics Zurich Scudder Investments, Inc.
Attn: Michael P. Famiglietti, Treasurer Attn: Robert J. Horton, Sr., Vice President
310 Salem Street 222 South Riverside Plaza
Woburn, MA 01801 Chicago, IL 60606
Phone: (781) 933-6004 Phone: (312) 537-8841
Fax: (781) 933-2726 Fax: (312) 537-1001
E-mail: mfam.nepcorp@verizon.net E-mail: robert j horton@scudder.com
------------------------ ---------------------------
Coca-Cola Fountain The Bank of New York, Indenture Trustee
Attn: William Kaye Attn: Irene Siegel, Vice President
31 Rose Lane 101 Barclay Street - 21W
East Rockaway, NY 11518 New York, NY 10286
Phone: (516) 374-3705 Phone: (212) 815-5703
Fax: (516) 569-6531 Fax: (212) 815-3466
E-mail: billkaye@optonline.net E-mail: isiegel@bankofny.com
---------------------- --------------------
Federated Investment Management Company GSCP Recovery, Inc.
Attn: Steven Wagner, Assistant Vice President Attn: Robert Hamwee, Managing Director
1001 Liberty Avenue - 2nd Floor GSC Partners
Pittsburgh, PA 15222-3779 500 Campus Drive, Suite 220
Phone: (412) 288-6956 Florham Park, NJ 07932
Fax: (412) 288-6737 Phone: (973) 437-1010
E-mail: swagner@federatedinv.com Fax: (973) 437-1037
------------------------ E-mail: rhamwee@gscpartners.com
-----------------------
First Star - U.S. Bank Affiliate of First Star Peak Contracting, Inc.
Attn: Lawrence J. Bell Attn: Bryan Byrd - President
U.S. Bank Trust, NA 13003 Shaneybrook Circle
1420 Fifth Avenue, 7th Floor Reistertown, MD 21136
Seattle, WA 98101 Phone: (410) 628-1222
Phone: (206) 344-4654 Fax: (410) 628-1223
Fax: (206) 344-4630 E-mail: peakcontracting@aol.com
-----------------------
E-mail: lawrence.bell@usbank.com
------------------------
EXHIBIT D
Members of the Senior Lender Steering Committee
[TO FOLLOW]
EXHIBIT E
Financial Projections
[TO FOLLOW]
EXHIBIT F
Liquidation Analysis
[TO FOLLOW]
EXHIBIT G
Reorganized Debtors
[TO FOLLOW]