Spanish-language broadcaster Telemundo Group Inc. Friday consented to Chapter 11 bankruptcy protection after reaching agreement with its largest creditors on terms of a restructuring plan.
The move comes in response to a petition filed in June by three junior bondholders seeking to force the company into Chapter 11.
Filed to stop
Wilbur Ross of Rothschild Inc., a financial adviser for the bondholders, said they filed the petition to stop the accrual of interest on $ 283 million in principal of Telemundo’s unsecured debt. (The New York-based company has more than $ 300 million in total debt outstanding.)
The petitioners felt that if the company’s reorganization stretches over a long period, senior bondholders stand to reap the largest share of interest payments while junior holders would see their payments greatly diminished.
At the time of the petition, Telemundo called it “wholly inconsistent with the substantial progress and good will” that accompanied its debt restructuring negotiations, and was evaluating its options, including seeking to get the case dismissed.
A spokesman said the company said it came to the conclusion that filing for Chapter 11 was the most prudent way to go about its reorganization.
Terms of the new agreement include the cancellation of all of Telemundo’s existing indebtedness in exchange for the issuance by Telemundo to its creditors of cash, new senior subordinated notes, reorganized common stock, and stock warrants.
Further, Telemundo’s outstanding indebtedness will be reduced to less than one-third of its current $ 300 million level.
Telemundo’s existing common stock will be extinguished. However, existing shareholders will have the opportunity to purchase 14.5% of the common stock to be issued under the plan by the reorganized Telemundo.
Reliance standing by
Reliance Insurance Co. — which owns about one-third of Telemundo — has agreed to act as a standby purchaser of any common stock not acquired by Telemundo’s other shareholders.
Joaquin Blaya, prexy and CEO of Telemundo, said in a release: “We expect that our Chapter 11 case will be a short one and that Telemundo will emerge from Chapter 11 a much stronger company. During the pendency of the case, we will be conducting our business in the ordinary course while we finalize the documentation, solicitation and approval process with respect to the agreement with our creditors.”
The bankruptcy was filed with the Bankruptcy Court for the Southern District of New York.