Tell me more.
That’s the gist of a objection filed by the U.S. Trustee for New York, Connecticut and Vermont in response to Chapter 11 bankruptcy reorganization plans submitted by Cumulus Media.
In a court filing made Monday in a New York Federal bankruptcy court, an attorney for Trustee William Harrington took aim at Cumulus’ “Disclosure Statement for Joint Plan of Reorganization,” objecting to the language in its Chapter 11 plan solicitation materials. Harrington believes the wording, at present, creates concerns over whether or not certain creditors are able to make “an informed choice” as to approve the plan.
The filing outlines five reasons the court should deny the reorganization disclosure statement. But, lack of information is perhaps Harrington’s biggest beef.
“The disclosure statement must inform the average creditor as to what it is going to get and when, and what contingencies there are that might intervene,” the filing from Harrington’s attorney reads.
Harrington then criticizes Cumulus for drafting that Disclosure Statement that lacks additional information as to why its plan treats two different classes as unimpaired — despite the fact that under the plan the legal rights of each class member will be altered.
“Simply put, although the debtors list [both classes] as unimpaired, both classes are deemed to provide non-consensual third-party releases to non-debtors,” Harrington writes. “As this Judge Wiles discussed (in a previous case called Chassix), creditors whose rights do not simply pass through the bankruptcy process are not truly unimpaired, yet the [Cumulus] plan aims to do exactly this.”
Harrington also wants information in Cumulus’ Disclosure Statement that explains why creditors that reject or abstain from voting on the plan are all deemed to consent to third-party releases unless they separately opt out.
Imposing a third-party release on an impaired non-consenting creditor is a concern Harrington focuses on across the objection filed Monday (1/8). But, he’s also found it unclear if Cumulus’ Disclosure Statement and Plan complies with New York rules of professional conduct that prevent lawyers from limiting their liability.
“The Disclosure Statement and Plan should be amended to clearly comply with New York Rules of Professional Conduct,” Harrington notes.
The Nov. 29 bankruptcy filing allows Cumulus Media to enter into a Restructuring Support Agreement “with certain of its secured lenders, among others, holding, in aggregate, approximately 69% of the company’s term loan” to reduce Cumulus’ debt by more than $1 billion.
Paul, Weiss, Rifkind, Wharton & Garrison LLP is acting as legal counsel.
PJT Partners Inc. is acting as financial advisor to Cumulus.
Alvarez & Marsal is serving as restructuring advisor.
Cumulus is hoping to emerge from its reorganization efforts in May 2018. This would depend on the Federal Bankruptcy Court in New York’s approval of its plan giving Cumulus’ Term Loan Lenders 83.5% equity in the company. Unsecured creditors would receive 16.5% equity.
— Reporting by Adrian Zupp and Adam R Jacobson