Delaware Judge OK’s LBI Media BK Exit

0

A bitter dispute with junior noteholders regarding who the “rightful economic owners” of LBI Media are has come to an end in a Delaware federal bankruptcy court.


The Burbank, Calif.-based media company focused on Hispanic consumers saw its Third Amended Plan of Reorganization get the court’s approval.

Word of the judge’s approval came Wednesday morning, giving LBI Media the remainder of the day to start the process of starting anew from today (4/18).

With the OK from Chief U.S. Bankruptcy Judge Christopher Sontchi, by way of a 234-page decision, LBI Media now expects to complete its balance sheet restructuring and successfully emerge from Chapter 11 protection “within the next several months,” subject to regulatory approval.

Under the terms of the plan, which — importantly — is supported by all of LBI Media’s major creditor groups and sponsored by HPS Investment Partners, some $350 million of debt will be wiped clean from its balance sheet.

HPS will receive 100% of the new equity interests in the company.

But, what about the noteholders of the 11½%/13½% PIK Toggle Second Priority Secured Subordinated Notes due 2020, Series II — otherwise known as LBI Media’s second lien notes?

Thanks to an amendment, LBI Media’s general unsecured and ongoing trade creditors “are expected to receive significant recoveries on account of their claims against the company,” LBI said in a statement.

“Each of the members of the Junior Noteholder Group, who collectively hold over 90% of Class 4 claims, and certain funds or accounts managed or advised by Caspian Capital LP, the sole holders of Class 5 claims, have agreed to vote to accept the plan and grant the releases provided by Article X in the plan,” Sontchi wrote.

These releases, he added, “are an essential component of the plan.”

Article X is on Page 49 of the 234-page ruling.

LBI Media’s junior noteholders have been putting up a stink since January 16, when the group filed a motion asking the judge overseeing LBI’s restructuring petition to “commence and prosecute” a series of claims it is bringing against the company. Citing a long series of past cases to bolster its arguments, Paige Topper of Wilimington-based Morris, Nichols, Arsht & Tunnell — joined by attorneys from Boies Schiller Flexner — asserted that LBI engaged in the fraudulent transfer of at least $87 million to HPS.

This set the stage for a weeks-long tussle, with the junior noteholders calling themselves “the rightful economic owners of LBI.” The Ad Hoc Group of Noteholders is comprised of various funds including those from Caspian and Blackstone.

According to the junior noteholders, “the Debtors have failed to meet their burden of showing ‘good cause’ to extend exclusivity.”

The judge disagreed, perhaps saving LBI Media from liquidating some or all of its assets. In addition to its Fenomeno Studios, described as “the first Spanish-language Multiplatform Network in the U.S.,” LBI’s assets include the Estrella TV broadcast network and 10 owned-and-operated TV stations. LBI also owns and operates 17 radio stations across the U.S., while its Don Cheto Network sees one of its biggest radio stars syndicated to some 31 U.S. markets.

LBI commenced its chapter 11 process on November 21, 2018, and has continued to operate as usual throughout the restructuring.

Serving as the legal counsel for LBI Media are attorneys from New York-based Weil Gotshal & Manges LLP. On board as regulatory counsel are attorneys from Wiley Rein LLP.

Guggenheim Securities is serving as investment banker to LBI; Alvarez & Marsal is serving as financial advisor.


Additional information regarding LBI’s restructuring is available at https://dm.epiq11.com/case/LBM. LBI has also established a telephone hotline and e-mail address to respond to inquiries from interested parties regarding the restructuring. The telephone hotline is (818) 729-5300.