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To Columbia Gas Investors:
Columbia Gas has taken a major step forward in its efforts to emerge from
Chapter 11. The reorganization plans filed with the Bankruptcy Court on April
17 are the result of months of careful and complex negotiations with
representatives of the many diverse constituencies involved in these
proceedings. Columbia's Management and Board of Directors feel these plans
represent sound business solutions and believe they will be approved by
creditors and by shareholders. None of the official bankruptcy committees
opposes the plans.
The following are material excerpts from Columbia's press release issued when
the plans were filed. Information on developments regarding the plans will be
available through recorded messages on the Stockholder Information line
1-800-863-5331.
COLUMBIA GAS SYSTEM, COLUMBIA TRANSMISSION FILE CHAPTER 11 REORGANIZATION PLANS
The Columbia Gas System, Inc., and its principal pipeline subsidiary, Columbia
Gas Transmission Corporation, today (April 17) filed separate reorganization
plans and disclosure statements with the U. S. Bankruptcy Court for the
District of Delaware. The Parent Company plan proposes total distributions of
approximately $3.6 billion to its creditors, which includes $2.3 billion in
payment of the Corporation's pre-petition debt and $1.1 billion of interest on
that debt. Columbia Transmission's filing, which is supported financially by
the Parent Company, amends the plan it filed January 18, 1994, and proposes a
total distribution of approximately $3.9 billion to its creditors, including
approximately $2.2 billion to the Parent Company to resolve its secured and
unsecured debt claims; about $1.2 billion to resolve producer claims, and about
$300 million to resolve other third party claims. The two companies, which
have been operating as debtors-in-possession since July 31, 1991, also asked
the Bankruptcy Court to extend their exclusive periods for filing plans to
October 16, 1995, and soliciting acceptances to December 18, 1995.
Distributions under the two plans are projected to take place prior to December
31, 1995. Columbia Gas System Chairman and CEO John H. Croom said he is
optimistic that all necessary creditor, judicial, regulatory and shareholder
approvals for the plans can be obtained by that date. He also said he expects
the Corporation will emerge with investment-grade debt ratings.
SETTLEMENT AGREEMENTS - The plans incorporate terms of an agreement in
principle reached with virtually all of Columbia Transmission's major producer
creditors and a settlement with its firm service customers. The producer
agreement reflects settlements and minimum distributions for claims filed
against Columbia Transmission by 18 major gas producers and a group of
Appalachian producers. These producers represent in excess of 80 percent of
the approximately $1.2 billion that Columbia Transmission's reorganization plan
proposes to distribute to producer creditors to resolve all producer claims.
Producers who reject the settlement offers will be free to litigate their
claims and will receive the same percentage payout on their claims, when and if
ultimately allowed, as received by the settling producers. The producer
agreement in principle requires that the Bankruptcy Court approve the claim
settlements by October 27, 1995 and that the distributions under the plan occur
by June 28, 1996. The plan also incorporates a major settlement between
Columbia Transmission and its firm service customers on numerous Order 636
transition cost, rate and bankruptcy matters.
PARENT COMPANY PLAN - The Parent Company plan proposes paying creditors the
full amount of their principal balances and accrued pre-petition interest,
post-petition interest and interest on overdue interest through distribution
of: about $900 million in cash, to be funded by new bank debt; about $2.1
billion in new debt securities, with maturities ranging from five to 30 years;
and about $200 million in preferred stock and $200 million in dividend enhanced
convertible securities. The interest rate on the proposed new debt securities
and the dividend rates and other financial terms of the proposed new equity
securities will be based on market levels at the time of emergence.
COLUMBIA TRANSMISSION PLAN - The distribution of approximately $3.9 billion
proposed in Columbia Transmission's amended plan reflects a comprehensive
settlement. This settlement monetizes the enterprise value of Columbia
Transmission and provides for a Parent Company guarantee of all third party
distributions required under the plan, including the customer settlement, along
with other considerations for the retention of Columbia Transmission as a
wholly-owned subsidiary of the Parent Company and the resolution of litigation
over the intercompany claims, producer and other creditor claims and various
other issues. Confirmation of the plan would terminate pending litigation
challenging the status of secured and unsecured debt Columbia Transmission owes
the Parent Company and certain other intercompany transactions.
Columbia Transmission's amended plan proposes paying: 100 percent of all
priority and administrative claims which amount to approximately $255 million;
100 percent of the Parent Company's secured claim of approximately $2 billion,
including interest, which will be funded with new debt securities of
reorganized Columbia Transmission and all of its equity; 100 percent of all
unsecured claims of $25,000 or less which amount to approximately $8 million;
approximately $40 million which represents 72.5 percent of all trade and other
miscellaneous unsecured creditor claims in excess of $25,000; approximately
$160 million in customer refunds as provided under terms of the settlement
agreement between Columbia Transmission and its firm service customers and
certain other parties; 72.5 percent of the Parent Company's $351 million
unsecured claim; and 72.5 percent of the settlement values listed in the plan
to resolve claims filed by producers whose gas supply contracts were rejected
or who have pre-petition claims under those contracts in excess of $25,000.
Total payout to producers is projected to be about $1.2 billion.
The precise level of the distributions to producers and their total amount
depends on the ultimate outcome of litigation with producers who decline the
settlements offered to them in Columbia Transmission s plan and establish
claims that are higher or lower than those projected in the plan. Columbia
Transmission s plan provides that until the total amount of contested producer
claims is established, five percent of the amount distributable to all settling
producer claimants will be withheld. This will be used on a 50/50 basis with a
like contribution by reorganized Columbia Transmission to fund distributions on
contested producer claims in excess of those contemplated by the plan. Any
recoveries after the holdback fund is exhausted would be funded entirely by
Columbia Transmission, backed by the Parent Company s guarantee.
APPROVAL PROCESS - The next steps in the bankruptcy process are for the
Bankruptcy Court to approve the producer settlement and the customer settlement
and the two companies' disclosure statements. In addition, the Parent Company
plan and the Parent Company's financial participation in Columbia
Transmission's plan require Securities and Exchange Commission approval under
the Public Utility Holding Company Act. FERC approval of the customer
settlement is also necessary. After obtaining these approvals, some of which
can occur concurrently, the Parent Company will send a copy of its
reorganization plan and disclosure statement and a report of the SEC to each of
its creditors and shareholders for voting purposes. Columbia Transmission will
also send its reorganization plan and disclosure statement to its creditors for
voting purposes. The companies believe that all regulatory, judicial, creditor
and shareholder approvals can be obtained in order that distributions can take
place prior to December 31, 1995.
This letter supplements the Annual Report and Proxy Statement previously mailed
to stockholders. It is important that all stockholders vote at the Annual
Meeting. Those who have not voted are urged to do so. Stockholders wishing to
vote or change their vote may call Harris Trust at 1-800-296-3913 to request a
proxy card.
