Masonite Files For Chapter 11 Bankruptcy
More than a million dollars in debt, Masonite International has filed for Chapter 11 bankruptcy. The door and fiberboard maker has seen horrific revenue figures in the current recession.
Masonite is a door and fiberboard maker. The company is heavily involved in the construction industry. As you know, we are going through a period where both residential and commercial real estate has been devastated. With construction projects at a virtual standstill, it is really no surprise that Masonite has run into economic problems.
In filing for Chapter 11 protection, Masonite listed assets totaling $1.53 billion dollars. Unfortunately, it listed debts in the $2.6 billion dollar range. That puts it more than a billion in debt. To make matters worse, the company had missed meeting loan repayment requirements in the last two quarters.
Masonite is what is known as a processed Chapter 11 filing. What does this mean? Well, Masonite has already worked out debt modifications with many of its creditors. In fact, many of the major creditors have recognized that construction and real estate will be dead for a long time. As such, they’ve apparently agreed to lop $2 billion or so off the debt. Why would they do this? They’ll be given 97.5 percent of the stock of the company when it comes out of Chapter 11.
The Masonite bankruptcy filing brings an end to one of the ugliest investments we’ve seen in a very long time. Leverage buyout firm KKR purchased Masonite for 2.4 billion in April of 2005. Back then, the real estate and construction industries looked incredibly strong. Fast forward to the end of 2008 and you find KKR writing off the entire transaction. Yes, the buyout firm took a 2.4 billion dollar loss.
The Chapter 11 bankruptcy filing for Masonite is hardly the first for a major construction related company. It will also hardly be the last.