American Rice will emerge from bankruptcy in mid-August with a plan that will rid the company of $150 million in debt.

The bankruptcy reorganization plan was approved by a judge Tuesday, nearly a year after a dispute in Saudi Arabia left the company unable to pay farmers and other creditors.

American Rice, one of the nation's largest rice companies, markets the Comet, Adolphus, Blue Ribbon and Wonder rice brands in the United States.

With the reorganization, general unsecured creditors will be paid 10 cents on the dollar, secured creditors will receive nearly 90 cents on the dollar and bondholders will get 100 ownership in the Houston company.

American Rice's ongoing operations will be financed by Bank of New York with a $25 million long-term note and a $40 million revolving line of credit. American Rice plans to emerge from bankruptcy in the first half of August pending negotiations on terms and conditions of the loan.

American Rice filed for Chapter 11 protection after a packaging company in Saudi Arabia breached its contract to distribute the company's Abu Bint rice brand. American Rice built an alternative distribution system, but its brand stayed off grocery shelves for about six weeks in Saudi Arabia, the company's largest market, costing the company about $15 million.

The Saudi problem arose several months after a Harris County district court ordered the company to pay $7 million to Kingwood Lakes South and Tenzer Co., as a result of a failed real estate venture.

American Rice filed for Chapter 11 with about $200 million in assets and $220 million in debt.

With the reorganization, American Rice's management will stay intact, as will most of its operations, but many of the company's big problems have been eliminated, said Douglas Murphy, president and chief executive officer of American Rice.

"Before, we had four times debt to a dollar of equity," Murphy said.

American Rice will be a bit smaller as it emerges from bankruptcy court, having sold its olive company and closed down unprofitable rice operations.

Sales are predicted to drop by about $150 million - to $250 million a year. The company now has about 600 to 700 employees - about half the staff it had earlier.

"We are only focusing on things that are generating the most return," Murphy said.

The company will have a strong balance sheet, approved by the bondholders that will become its new shareholders, said Marc Beilinson, the lead bankruptcy counsel for American Rice.

Of the $16 million owed to general unsecured creditors, only $1.6 million will be repaid. Representatives of American Rice's unsecured creditors could not be reached for comment.

Owners of $115 million worth of American Rice bonds will receive 100 percent of the stock in the reorganized company, said Beilinson, an attorney for Pachulski, Stang, Ziehl & Young in California. In addition, bondholders will receive any proceeds recovered from the sale of property in Arkansas and the settlement of claims against Erly Industries, American Rice's former parent company.

Secured creditors were owed $40 million and will be repaid $30 million to $35 million.

With the reorganization, American Rice will sever its ties with Erly, which previously owned 81 percent of the company.