Financial restructuring for Crown Media Holdings


Crown Media Holdings, owner of Hallmark Channel and Hallmark Movie Channel, announced agreements for a recapitalization of the company.

The recapitalization transactions include, among other things, $315 million principal amount of HC Crown Corp. (HCC) debt being restructured into new debt instruments, $185 million principal amount of HCC debt being converted into convertible preferred stock of the company, Class B Common Stock being converted into Class A Common Stock with Class A Common Stock becoming the only authorized and outstanding common stock of the company, and the balance of HCC debt, which was approximately $600 million at December 31, 2009, being converted into shares of Class A Common Stock of the company. Upon execution of the Master Recapitalization Agreement, the automatic termination of the waiver under the existing Amended and Restated Waiver and Standby Purchase Agreement with Hallmark Cards, Incorporated and HCC was extended until August 31, 2010; the waiver defers payment dates on certain HCC debts.

The Special Committee of the Board and HCC approved and executed the Recapitalization Term Sheet, representing non-binding terms of recapitalization transactions for the company earlier this month. On February 26th, Crown Media Holdings entered into the Master Recapitalization Agreement with Hallmark Cards, HCC and related entities that provides for the recapitalization transactions.

“We believe the consummation of the recapitalization will be a very positive development for the company and with the significant reduction in our outstanding debt, will help us maintain the operating health of our company,” said Crown Media President and CEO Bill Abbott.
Other aspects of the recapitalization concern a Credit Agreement for the new debt, an amendment to the Tax Sharing Agreement with Hallmark Cards, a registration rights agreement, mergers of two intermediate holding companies with the Company, efforts to extend or replace the Company’s revolving line of credit, Hallmark Cards’ willingness to guarantee $30 million of a revolving line of credit, and a standstill agreement of Hallmark entities pursuant to which such entities agree not to acquire, through December 31, 2013, additional shares of Class A Common Stock of Crown Media, the subject to certain exceptions, and agree to certain restrictions on their ability to sell or transfer shares of Class A Common Stock of Crown Media until December 31, 2013 and, subject to lesser restrictions, until December 31, 2020.

Crown Media Holdings trades on Nasdaq as CRWN.