Troubled Ion Media Networks has lender approval to dip into its D-I-P loan to create a new common stock, thus getting out from under $2.7B in debt and clearing a path out of Chapter 11. The plan has been approved by over 70% of holders of first lien secured debt – it is not as popular among lesser creditors. This group also put up the $150M Ion has been using as debtor-in-possession, and which it will use to create the new stock.
Here’s how the plan breaks down, according to Ion: “upon consummation, the Debtors’ $150 million debtor in possession financing facility will convert into 62.5% of the new common stock of reorganized ION; the holders of ION’s first lien secured debt claims will receive their pro rata share of 37.5% of the new common stock of reorganized ION; the holders of ION’s second priority notes claims will receive, on a pro rata basis, warrants to purchase 5% of the new common stock at an equity value of $1 billion; the holders of general unsecured claims will receive, on a pro rata basis, warrants to purchase 5% of the new common stock at an equity value of $1.5 billion; and all outstanding ION equity interests, including common stock, preferred stock and any options, warrants or rights to acquire any equity interests, will be cancelled and extinguished and holders thereof will not receive a distribution.”
“The filing of our Plan is a significant step towards emerging from Chapter 11 as a stronger, more competitive company,” said Brandon Burgess, ION’s Chairman and CEO. “We are pleased to have the support of our lenders and appreciate their cooperation in facilitating ION’s restructuring. We have made substantial progress in addressing our operational and financial challenges and we are confident that the company will be well-positioned to create value for all of its stakeholders upon emergence.”
According to Bloomberg, Ion is heading to court to try to head off an attempt by a second-lien secured lender to challenge those ahead of it in line. Ion says Cyrus Select Opportunities Master Fund Ltd. ceded its right to challenge in agreements dating back to 2005.