Almost one year after filing for bankruptcy, MobileMedia Corp. announced plans to emerge from Chapter 11 restructuring by mid-year, and as part of that effort has filed a reorganization plan with the U.S. Bankruptcy Court for the District of Delaware.
Under the terms of the plan, holders of the company’s $649 million of pre-petition secured debt would receive $150 million of 10-year senior notes and 97 percent of the company’s common stock. Holders of MobileMedia’s pre-petition unsecured debt would receive a combination of 3 percent of the company’s stock, warrants and other considerations. Also, current equity in the company would be extinguished.
According to MobileMedia, the plan would reduce its existing debt by about 80 percent and would eliminate the need for a hearing to determine its fitness to hold a paging license. The Federal Communications Commission ordered such a hearing last April, but the hearing was stayed in June, pending confirmation of the company’s reorganization plan.
“In 1997, the company was able to fund all post-petition interest and capital expenditure from internally generated funds, and substantially exceeded its forecasted financial results,” said Joseph Bondi, managing director of the turnaround firm Alvarez & Marsal Inc. and chairman of Restructuring of MobileMedia. “This plan will enable MobileMedia to emerge from Chapter 11 with an extremely strong balance sheet with strong prospects for growth.”
The company’s Steering Committee of its secured lenders, which holds about 45 percent of the total debt of the secured lender group and is MobileMedia’s largest creditor group, said it favors the plan.
However, the company’s Unsecured Creditors Committee, which represents the holders of its subordinated debt, opposes it.
According to Krista Grossman, MobileMedia spokeswoman, such disapproval of restructuring plans by unsecured creditors is fairly common, because they are in large part bondholders that want a greater piece of the pie than the restructuring plan allows. Restructuring law requires Chapter 11 companies to accommodate secured creditors first, Grossman said.
She added that the company will do whatever possible to convince the unsecured creditors to agree with the plan, but “In the event they don’t, we still expect to have the plan approved in court,” she said.
A hearing for the plan is scheduled for mid-April, to be followed by a vote by creditors. MobileMedia announced several weeks ago its plans to begin constructing a narrowband personal communications services system.
“We have largely accomplished what we set out to do during this reorganization proceeding,” said Ronald Grawert, chief executive officer of MobileMedia. “We believe our re-engineered operational processes will be benchmarks for the industry.”
