Alpha Media USA LLC said it reached an agreement with affiliates of Brigade Capital Management and Intermediate Capital Group to provide the company "with a path to a fully consensual balance sheet restructuring in Chapter 11."
According to a Feb. 18 bankruptcy court filing, Brigade and ICG will provide the company with $115 million in debtor-in-possession, or DIP, financing that would be used, in part, to retire the first-lien debt currently held by Fortress Investment Group before plan confirmation. In addition, in conjunction with the DIP, the company entered into a restructuring support agreement, or RSA, with second-lien noteholders and unsecured noteholders, primarily ICG, to back a reorganization plan providing for the equitization of the company's second-lien debt and the reinstatement of general unsecured claims.
The company filed an amended reorganization plan, disclosure statement, and approval motion for the new DIP with the Richmond, Va., bankruptcy court on Feb. 18, and in an accompanying motion asked the bankruptcy court to accelerate its confirmation timetable to allow for a reorganization plan confirmation hearing to be held on April 1, rather than the initially scheduled April 15.
A hearing on the adequacy of the company's disclosure statement remains slated for its original date of March 11.
ICG, the holder of the second-lien debt, is the only party entitled to vote on the reorganization plan.
Specifically, the proposed reorganization plan states that first-lien claims, allowed in the amount of about $90 million, will have been paid in full, in cash, by the proceeds of the DIP (although the allowed amount of first-lien claims appears to be in dispute, with Fortress claiming it is owed about $96.4 million). Second-lien claims, which would be allowed in the about of roughly $72.6 million, would receive 85% of the equity in the reorganized company, equating to a projected recovery of 41%-83%, according to the disclosure statement (Note, however, that court filings are unclear on this distribution, with the company's motion for approval of the disclosure statement stating that second-lien notes would receive 100% of the equity, but the reorganization plan and disclosure statement stating that holders would receive 85% of the equity. The matter is further complicated because the recovery rate set forth in the disclosure statement suggests a recovery of 100% of the equity, based on the company's estimated going concern enterprise value of $145 million to $175 million, with a midpoint of $160 million. The company has not yet responded to a request for clarification).
Meanwhile, the company's unsecured notes allowed in the amount of $103.9 million, would not receive any recovery.
The DIP facility would consist of a $95 million senior facility provided by Brigade, the proceeds of which would be used to purchase Fortress's first-lien debt and to provide incremental liquidity. In addition, a $20 million junior facility would be provided by ICG and other financial institutions that would be used, in part, to pay off the company's existing interim DIP of $5 million.
DIP milestones include approval of the disclosure statement by March 25 and reorganization plan confirmation by May 14.
Interest under the senior facility is L+800, while interest under the junior facility is L+950. The DIP would convert into new first- and second-lien exit facilities upon emergence.
It is worth noting that Fortress has objected to the approval of the new DIP, arguing that the company has not yet acknowledged the payoff amount of roughly $96.4 million.
A hearing on approval of the DIP is set for Feb. 28.
As reported, the company filed for Chapter 11 on Jan. 24 to implement a restructuring agreement the company reached with ICG, explaining that the company had agreed upon a proposed prepackaged reorganization plan with creditors earlier that month, launching a plan solicitation Jan. 8. On the voting deadline of Jan. 15, however, the prior holders of the company's first-lien debt notified that company that they had sold their positions to Fortress.
"Fortress soon made it clear to the debtors' advisors and advisors to ICG that it was not willing to immediately agree to support the prepackaged Chapter 11 plan," the company explained.
With the prepackaged proposal no longer viable, the company developed an alternative plan, with both Fortress and ICG submitting proposals. The Fortress proposal was predicated on, among other things, a bankruptcy sale process without a stalking horse bidder. However, the company determined that the Fortress proposal was not viable and instead pursued an equitization proposal from ICG.
Subsequently, on Feb. 8 the company received two new post-petition financing proposals from Fortress and Brigade, respectively. The company opted for the Brigade proposal, which ICG supported.
