Equity Media Holdings and lender Silver Point Finance have come to terms and Equity Media’s Chapter 11 bankruptcy filing will not be converted to Chapter 7 liquidation. A Chief Restructuring Officer (CRO) has been appointed with near-total control to run the company and decide whether to sell any of its stations. The settlement came after a scheduled hearing on the motion to convert to Chapter 7 was scuttled by an ice storm that hit Little Rock.
The new CRO is Kim D. Kelly, a former President of cable MSO Insight Communications. She has lately been dealing with workout situations.
“The CRO shall have sole authority and control over all of the affairs and operations of each of the Debtors or their subsidiaries and affiliates (including, without limitation, all sales of the assets of each of the Debtors or their subsidiaries and affiliates) and, pursuant to section 1107(a) of the Bankruptcy Code, shall have all of the powers, rights and duties vested or ascribed to the Boards of Directors of the Debtors (collectively referred to hereinafter as the “Board”), and the CRO shall have sole authority to exercise such powers and rights in a manner consistent with the fiduciary duties owed by a debtor-in-possession or a chapter 11 trustee and shall be deemed a fiduciary as if the CRO were the Board or a chapter 11 trustee. The CRO shall note be required to request or seek any approval from the Board before taking any action (or omission) with respect to any of the Debtors or their affiliates,” stated the stipulation and agreed order signed by Judge James Mixon and lawyers for both Equity Media and Silver Point.
The duties spelled out for Kelly also allow her to replace company management and members of the board of directors, to hire and fire employees, consultants, brokers, accountants and etc, and to file in legal proceedings for the company, including the authority to file to convert the bankruptcy proceeding to Chapter 7 liquidation. The board of directors may only terminate her “for cause,” as spelled out under the Bankruptcy Code. In other words, she has total authority unless she were to do something really outrageous.
Under the settlement, the creditors are also guaranteed reasonable access to inspect the books and records of Equity Media Holdings and are to be kept apprised of the status of any asset sales.
RBR/TVBR observation: Silver Point got the main thing that it wanted – the appointment of an outsider to take over management of Equity Media Holdings. She doesn’t have to liquidate the assets, but we would expect several station sales to be filed quickly. The board of Equity Media, on the other hand, succeeded in preventing what they feared would be a fire sale in Chapter 7.