Interep's pre-packaged Chapter 11


This is going down pretty much as our RBR observation had suggested a few days ago (3/20/08 RBR #56). Interep has reached a deal with its creditors and filed Chapter 11 cases in Federal Bankruptcy Court for the company and its subsidiaries. CEO David Kennedy tells RBR that under the proposed reorganization plan, Interep’s bond holders will become major shareholders and also provide Interep with new financing for future growth. If all goes according to plan, Interep will exit Chapter 11 reorganization in about 90 days.

Reworking the capital structure has been a top priority for Kennedy since taking the job at Interep. Now he is able to chart a course for the future and employees are no longer having to worry about what happens when 99 million bucks worth of bonds come due July 1st. That deadline has gone away. The major bondholders, Oaktree Capital Management and Silver Point Capital, have agreed to exchange those old bonds for debt and equity – 40 million in new debt that won’t require cash interest payments by Interep and what Kennedy says will be the “vast majority” of Interep’s equity, making it a private company going forward. Oaktree and Silver Point will provide 25 million in debtor-in-possession financing right away. That comes due when the company emerges from Chapter 11 and will be replaced by a new 50 million in financing. The makeup of the new board of directors hasn’t been worked out, but you can bet that the new majority owners will be well represented.

“We anticipate that the opportunities which we see for growth for the future of the company will involve some acquisitions and so we have negotiated that larger exit facility in order to accommodate that,” Kennedy told RBR/TVBR. He said those opportunities are likely to be in “complementary media along with radio – and we’re going to design a company that can execute that plan.”

Interep currently has rep firms in radio, Hispanic television and online.

RBR/TVBR observation: Things have certainly changed since Oaktree Capital Management first acquired its pile of Interep bonds three years ago and began pressing for a payoff (4/18/05 RBR #76). Now it’s assuming the role of a major owner of the company and putting up more cash to grow Interep. Unfortunately for many Interep employees, as well as other shareholders, the IPO back in the high-flying market year of 1999 proved to be a misadventure. The 12 bucks per share IPO price is ancient history and the stock has been trading for some time now at just a few cents. It closed at a nickel yesterday on word of the Chapter 11 filing, but it is essentially worthless since current shareholders will get nothing when the restructuring is completed. So, it’s time to move on.