With Regent Communications back on track for a quick exit from Chapter 11 reorganization, one of its largest shareholders is asking the bankruptcy court to put on the brakes. Resilient Capital Management wants a new reorganization plan which will give shareholders more than the 12.8 cents per share “gift” they’re currently in line to receive.
According to a recent SEC filing, Resilient acquired all of its 2,802,193 shares of Regent – a 6.6% stake – between December 23, 2009 and March 2, 2010 for approximately $444,000, which works out to a bit over 15.8 cents per share. Obviously, it would not find 12.8 cents per share an attractive proposition.
In a filing with the US Bankruptcy Court on Tuesday, Resilient took issue with the valuation prepared by Oppenheimer & Co. for the debtor which found the current equity holders to be “out of the money.” Resilient claims that Oppenheimer was arbitrary in selecting comparable companies for the valuation purpose and that if the three companies closest in size to Regent were used, the EB ITDA multiple would have been – and Resilient argues “should have been” – higher.
Resilient’s re-do of the math claims that rather than being worth less than its outstanding senior debt, Regent actually has $36 million of equity value above and beyond the debt and restructuring costs, or 83 cents per share in value. And that’s using the Oppenheimer methodology. Resilient says its own estimate comes up with a value of $1.32 per share.
Resilient has requested that Judge Kevin Gross appoint a special committee to represent the interests of current shareholders.
According to Resilient, Regent management can’t fairly represent the interest of shareholders because CEO Bill Stakelin, CFO Tony Vasconcellos and other top managers stand to receive 8% of the reorganized company, while most of their current stock options have strike prices well out of the money.
Under the reorganization proposed in the pre-packaged plan, all of Regent’s equity, except that 8% reserved for management, would be held by its senior lenders, primarily Oaktree Capital Management and GE Capital.
RBR-TVBR observation: Even a pre-packed Chapter 11 is not guaranteed to have smooth sailing. Regent is trying to get through the reorganization confirmation process in 45 days or less so that it has sufficient cash to fund all of the provisions of the pre-packaged plan. A hearing is set for April 9th on whether Resilient will succeed in throwing a monkey wrench into the works.