It’s been 11 months since Regent Communications was declared in technical default of its loan agreements. Now, a long series of negotiations has produced agreement on a pre-packaged Chapter 11 filing, which will leave the creditors as Regent’s new owners, but at least leave its current shareholders with a small payoff.
“We are pleased to move forward with the majority of our senior lenders in taking the necessary steps to substantially strengthen our capital structure,” said President and CEO Bill Stakelin. “Throughout the economic downturn, we have continued to implement our strategic plan to build our presence among advertisers and audiences across our local market clusters, while carefully managing our costs. Following our reorganization, we will benefit from a strong financial position and solid cash flow, giving us the flexibility to continue to invest in our operations and execute our strategy. This is a solution that preserves Regent’s unique voice in the nation’s mid-sized media markets and enhances our ability to fully benefit from the rebound in the nation’s advertising industry,” he added.
Under the deal filed in US Bankruptcy court in Delaware, senior debt-holders will convert their debt into a new series of equity, eliminating approximately $87 million of Regent’s debt. In its Chapter 11 filing, Regent listed approximately $211,282,000 of debt and estimated its assets at $166,506,000.
The restructuring agreement terms, signed by representatives of Oaktree Capital Management and GE Capital, the restructured Regent will receive a new four-year senior secured loan of $95 million, $25 million of PIK (payment in kind) loans running four and a half years and a new $5 million revolving loan facility.
Current shareholders will be paid approximately 12.8 cents for each share that they own. As of February 20th, the company reports that it had 43,005,020 shares outstanding to share in the payout of $5.5 million on a pro rata basis. That payment is described in the restructuring terms sheet as a “gift” to the shareholders, whose shares will then be canceled.
Regent’s shareholders are named in an extensive list included in the bankruptcy filing. Among those with 5% or more of the company’s shares are Riley Investment Management and entities affiliates with its representative on the Regent board, John Ahn, at 4,155,129 shares, or 9.66%; entities affiliated with Lloyd I. Miller III 2,986,929 shares, or 6.95%; board member John Wyant and entities associated with his Blue Chip Venture Company, 2,986,929 shares, or 6.95%; HJH Partners LLC 2,845,452 shares, or 6.62%; entities affiliated with Don A Sanders, Vice Chairman of Sanders Morris Harris Group Inc. and Chairman of SMH Capital, 2,671,479 shares, or 6.21%; and entities affiliated with Dimensional Fund Advisors LP 2,213,848 shares, or 5.15%.
The terms sheet requires the reorganized Regent to assume the employment agreements of CEO Bill Stakelin and CFO Tony Vasconcellos, which were just renewed on the last day of 2009 for three more years, but amended last week according to the bankruptcy documents. The new Regent must also assume the 2004 Corporate Employee Retention and Severance Plan, the 2010 Special Bonus Plan with bankruptcy incentives as adopted by the board in December 2009 and the Regent Communications Inc. Deferred Compensation Plan.
Also, options, equity or other equity-based grants equal to 8% of the total equity of the new company will be reserved for a management equity incentive plan, with the exact terms to be drawn up by the new board.
Regent stated that it has approximately $11 million in cash on hand, giving it ample liquidity and sufficient funds to pay all of its vendors and employees. According to the court filing, the largest unsecured creditor is Arbitron, owed nearly $85K. SESAC is owed over $60K, Brainerd Communicators (Regent’s PR firm) $50K and Integrys Energy Services of Green Bay, WI nearly $25K.
Six subsidiaries of Clear Channel Communications are on the list of Regent’s 30 largest unsecured creditors: Premiere Radio Networks, over $26K; Katz Media Corp., nearly $11K; Radio Computing Services, just over $10K; Katz Radio, over $9K; Christal Radio, nearly $7K; Clear Channel Broadcasting, just over $5K; and Clear Channel Outdoor, just under $5K.
Some other unsecured creditors of interest to broadcasters include the Radio Advertising Bureau, $11.5K; Spacial Audio Solutions, just over $11K; Marketron just under $5K; and the National Association of Broadcasters $3.6K.
The company said the restructuring process will have no impact on Regent’s day-to-day operations.
RBR-TVBR observation: It looks like Regent’s management and directors drove a hard bargain. Unlike most broadcasting company bankruptcies in recent years, the stockholders are not being wiped out completely.