UPDATE 1-Constar lands back in bankruptcy

Tue Jan 11, 2011 6:11pm EST

* Constar files second bankruptcy in two years

* Company to convert debt to equity

* Blames changes by Pepsi bottler for bankruptcy

* Second "Chapter 22" filed on Tuesday

By Tom Hals

WILMINGTON, Del., Jan 11 (Reuters) - Plastic container maker Constar International Inc CNST.O filed for a pre-arranged bankruptcy on Tuesday, marking its second bankruptcy in a little over two years.

The company said in a statement that it had reached agreement with holders of more than 75 percent of the company's senior secured floating rate notes.

The company plans to swap its $220 million floating rate notes into $70 million of new term debt. The noteholders will also receive $30 million of convertible preferred stock and will become the majority owners of the company when it emerges from bankruptcy.

The Philadelphia-based company's existing stock will be cancelled.

Some noteholders will also provide the company a $55 million bankruptcy loan, known as debtor-in-possession or DIP finance, to pay off some of its debt and to fund operations while in court protection.

The company was spun off by Crown, Cork & Seal Co Inc in a 2002 initial public offering.

The company blamed the latest filing on a shift by its largest customer, which bottles Pepsi, to manufacturing its own drink containers.

The filing is the company's second, a so-called "Chapter 22."

The company first filed for bankruptcy in December 2008. Under that plan, it converted its senior subordinated notes into equity. The company emerged from bankruptcy in May 2009.

It was the second "Chapter 22" filing on Tuesday, joining retailer Anchor Blue Holding Corp. For details see [ID:nN11139430]

Academic studies done in the 1990s by Edith Hotchkiss, now a professor at Boston College, and Lynn LoPucki of the University of California at Los Angeles Law School, showed that about a third of companies emerging from bankruptcy end up being restructured again within a few years.

The case is in re: Constar International Inc, U.S. Bankruptcy Court, District of Delaware, No. 11-10109. (Reporting by Tom Hals; Editing by Bernard Orr)

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