Classic Communications Inc. edged closer to emerging from Chapter 11 after a U.S. Bankruptcy Court judge in Delaware approved a disclosure statement regarding an amended reorganization plan put forward by its secured and unsecured creditors.
The plan, submitted Nov. 8 and set for overall creditor approval on Dec. 17, would pump an additional $110 million in cash into the troubled MSO, while giving bondholders the majority of equity in a newly formed company.
U.S. Bankruptcy Court Judge Peter J. Walsh approved the disclosure statement for the amended reorganization plan on Nov. 12, scheduling a Dec. 17 hearing for confirmation.
Objections to the plan must be made by Dec. 11. If no objections are made, Classic will emerge from what has been a year-long ordeal.
Classic first filed for Chapter 11 protection in November of 2001, citing assets of $711.3 million and liabilities of $641.8 million. The company had been operating under $30 million of debtor-in-possession financing, but has been losing subscribers since it filed for bankruptcy protection.
The amended plan is similar to one submitted by Classic's unsecured creditors in August. That plan called for a $20 million loan, a $100 million term facility and a debt-for equity swap that would give Classic's bondholders — owed $406 million — for 100 percent equity in a newly constituted company.
The approved plan calls for an $20 million revolving credit facility and $90 million in new notes. Bondholders would receive about 1 million shares of new equity in Classic, or about 52 percent of outstanding shares in the new company. The plan values Classic at between $300 million and $360 million.
The bondholders that stand to receive the most equity are OCM Principal Opportunities Fund II — also Classic's largest unsecured creditor, and co-author of the amended plan — and Goldman Sachs Credit Partners, a co-author of the plan and the MSO's largest secured creditor.
OCM Principal Opportunities Fund II is a private equity-distressed debt fund managed by Oaktree Capital Management. GSC is affiliated with New York investment bank Goldman Sachs & Co.
OCM would be allowed to elect four members to Classic's board of directors. The creditors committee would receive two seats and the remaining seat would go to Dale Bennett, Classic's president.
Bennett will remain in that position after the bankruptcy.
The plan is expected to allow Classic to pay off a $30 million DIP facility it received shortly after filing for bankruptcy last year. The rest of the money will be used for operations.
Classic, according to its 10-Q quarterly report filed on Nov. 14, had about 325,000 subscribers as of Sept. 30 — about 25,000 customers less than in the year-ago period. Third-quarter revenue was up by $500,000 to $44.9 million, while free cash flow rose to $5.6 million, compared to negative free cash flow of $6.5 million in the prior year. Free cash flow is cash flow once interest payments and capital expenditures are made.