The Official Committee of Unsecured Creditors has asked a federal bankruptcy judge in New York to reject the sale of Young Broadcasting to its secured lenders. What’s the rush, they say? Young’s business is improving and the sale should be put off for a while for a better bid.
The unsecured creditors have asked Judge Arthur Gonzalez to say no to the proposal to have the company’s secured creditors acquire the entire company for part of what they are owed, leaving nothing for the unsecured creditors or shareholders. With the market for broadcast properties in the tank and financing virtually unavailable, the unsecured creditors claim the auction process was a sham and should be disregarded.
The unsecured creditors prefer their own plan which would have Young emerge from Chapter 11 intact. The senior loans of $357 million would remain in place. New investors would contribute approximately $35 million to receive new preferred stock and 80% of newly issued equity. The unsecured creditors would receive 10% and have the option of participating in a new rights offering. Certain existing shareholders would receive 10%. The unsecured creditors say that would be more equitable and preferable to the pending sale, which they claim is nothing but a foreclosure.
In response, the bankruptcy counsel for Young Broadcasting denies that the sale process was flawed. It provided details of how UBS approached 69 parties about potential interest in Young, yielding only seven indications of interest. Only two actual bids were submitted, besides the one from the senior lenders, both well below the $220 million credit bid offered by the lenders.
As for the claim that the Young assets will be worth a lot more in the future, a statement by Janine Shelffo, Managing Director of the Global Media and Communications Group of UBS Securities, noted that there is no certainty about the timing of a recovery. “There is currently little evidence of near term recovery in advertising spending; in fact, recently released adverting industry forecasts have lowered 2009 estimates and extended the timing of a recovery,” Shelffo said.