US Bankruptcy Judge Kevin Gross has approved the Chapter 11 reorganization plan of Regent Communications and rejected a motion by a major shareholder to put on the brakes and appoint a special committee to represent shareholders. The objecting shareholder had insisted that shareholders should get more than the 12.8 cents per share that they will receive under the plan which has now been approved.
Judge Gross rejected the request for a special committee of shareholders from Resilient Capital Management after hearing testimony Friday from Regent CEO Tony Vasconcellos and Bill Lisecky of Oppenheimer & Co., which did the valuation study for the management plan. They were subjected to “an effective and skilled cross-examination” by Resilient’s attorney, according to the judge, but he was not convinced that Resilient and other shareholders were being shortchanged.
The testimony revealed that when Regent was marketed to potential buyers, the top bid was $140 million. And Judge Gross found no fault with the valuation by Oppenheimer, which determined that Regent’s assets were worth less than its $212 million of debt. The proposed $5.5 million total payment has been called a “gift” to the current shareholders, which was negotiated by Regent management. While the judge agreed that radio valuations had been depressed by the recession, he said there was no evidence of when or whether a turnaround will occur, so he rejected Resilient’s claim that the Chapter 11 proceeding is being timed to take advantage of a temporary valuation trough.
“The appointment of an Equity Committee will, by necessity, delay the hearing on confirmation of the Plan by one month. During that time, the Debtors would be in financial distress and, based on the evidence, there would be no benefit to equity because there is not a substantial likelihood of a substantial recovery for equity. The greater likelihood is that the $5.5 million available to equity under the Plan will no longer be available,” Judge Gross wrote in his decision rejecting the motion from Resilient.
The reorganization plan approved by the judge will leave Oaktree Capital as the primary owner of Regent, with much of the debt held by Oaktree converted to equity. Unsecured creditors are to be paid in full and, as mentioned, the current shareholders will receive $5.5 million, or about 12.8 cents per share.
In his ruling, Judge Gross also approved a modification of the reorganization plan to recognize that SoundExchange holds an allowed unsecured claim of just under $32K. It is to be paid, along with other claims, as soon as reasonably practical after the effective date of Regent’s emergence from Chapter 11. That effective date should be set soon.
RBR-TVBR observation: Not a surprise, but a relief nonetheless for Regent management, which can now go back to focusing exclusively on running the business. Of course, now they will be working for a different owner.