In response to the motion by senior debt holders to restrict how Inner City Media Corporation (ICMC) can use its cash, the broadcaster asked a federal bankruptcy judge to reject the restrictions and allow it to conduct business as usual. ICMC blamed cash sweeps by the creditors for forcing it “prematurely” toward Chapter 11.
In its filing with the US Bankruptcy Court in New York Inner City noted that it would not “have license to destroy value” of the business in response to the involuntary Chapter 11 petition. “Here, the Petitioners offer scant evidence of any wrongdoing and are not entitled to the extraordinary relief that they seek.
Inner City took issue with the attempt to prohibit any salary and benefit payments to CEO Pierre “Pepe” Sutton, noting that his compensation package has been in place since 2003 and that the CEO should be able to devote his full attention to the restructuring without the “distraction” of a battle over his compensation. The motion by the creditors, it said, did not claim that Sutton’s compensation is exorbitant. Rather, it is “retaliation” for the role they believe he played in killing a proposed voluntary Chapter 11 restructuring deal prior to the involuntary proceeding.
Inner City also insisted that it has the right to have advisors of its own choosing and to pay them. The senior creditors had sought to prohibit any payments to the new financial advisor and law firm who were hired when the voluntary bankruptcy deal was scuttled and the previous advisors were fired.
The broadcaster provided a three-week budget to the court. It starts with a little over $1.2 million in the bank – after cash sweeps by the creditors took most of what had been about $21 million – and ends with $374 million in cash on hand. The budget anticipates over $2.4 million of ad revenue being received over the three weeks. Payroll is scheduled to take $831K in wages, benefits and payroll taxes for the period. Other routine outlays bring the total for operating expenses to just shy of $2 million. Payments to the bankruptcy advisors will take an additional $1.3 million.
ICMC asked the judge to reject the reject the creditors’ motion outright, or to grant instead a motion proposed by ICBC which would allow it to continue to conduct routine business and to pay Sutton and its advisors, prohibiting only any unusual transactions such as the transfer of cash to any ICBC insider outside the ordinary course of business or unusual travel and entertainment expense reimbursements for any executive.
US Bankruptcy Judge Shelley Chapman was set to hear arguments on the competing motions on Wednesday (8/31). It is not known when any decision might be rendered.