Classic Communications Inc. said it has discontinued negotiations with its lenders concerning a $75 million loan, and as a result it has defaulted on one interest payment on its outstanding debt and is prohibited from making another payment due Aug. 1.
In a press release issued last Wednesday, Classic said it was unable to make an interest payment due July 6 under a $240 million credit agreement and was prohibited from making a $7.2 million interest payment on its senior secured notes due Aug. 1.
In the statement, the company said it hired Credit Suisse First Boston Corp. as a financial adviser to look into other possible funding sources.
The loan, from an affiliate of Brera Partners L.P., Classic's controlling shareholder, Credit Suisse First Boston, was first announced in May. The loan, which Classic said at the time was expandable to $148 million, needed the approval of the company's other lenders.
But it appears that those lenders have rejected the deal, a move that could put Classic's future in doubt.
Earlier last month, sources close to the MSO said a pair of "vulture investors" — Romulus Holdings Inc. and Cerberus Partners Inc. — were buying up Classic debt for as little as 40 cents on the dollar.
Credit Suisse has started discussions with Classic's senior lenders and holders of its subordinated debt about pursuing a consensual restructuring of the debt, Classic said in the statement.
The National Association of Securities Dealers has also notified Classic that its stock has failed to maintain a minimum $1 per share price and could be delisted from the NASDAQ system, the company said.
Classic has until Sept. 18 to boost its stock price to $1 each and to maintain at least that level for 10 consecutive days. The stock, which dropped 3 cents per share to 15 cents each on Thursday, has been trading under $1 per share for the past 60 consecutive days.
Classic went public in Dec. 8, 1999, with an initial pubic offering price of $25 per share. The stock, which reached as high as $39 each that same month, has been in a freefall ever since.