A bankruptcy-court hearing on MobileMedia Corp.’s disclosure statement, originally scheduled for April 14, has been delayed until May 12 so the company’s secured and unsecured creditors’ committees have more time to come to a consensus on the proposed reorganization plan.
The company’s unsecured creditors’ committee, which represents its subordinated debt holders, has opposed the reorganization plan from the beginning. The secured creditors’ committee has endorsed the plan.
Under the terms of the current plan, holders of MobileMedia’s $649 million of pre-petition secured debt-the banks, represented by the secured creditors’ committee-would receive $150 million of 10-year senior notes and 97 percent of the company’s reissued common stock. Unsecured creditors (the bondholders), get 3 percent of the new stock, warrants and other considerations.
Krista Grossman, a MobileMedia spokeswoman, said the company would prefer both creditor committees back the plan before MobileMedia moves forward with it, but said the company ultimately will submit the plan regardless of whether a consensus can be reached. Grossman would not discuss what issues were obstacles to a consensus, but it is likely the unsecured creditors are not pleased with their assigned 3 percent. Chapter 11 rules require companies to accommodate secured creditors first.
The disclosure-statement hearing was delayed because if changes are made to the reorganization plan, changes also will have to be made to the disclosure statement.
Most of those opposed to the plan are stockholders whose stock would be worthless under the reorganization plan because all equity in the company will be extinguished. They have no input in the reorganization process. Several shareholders allege MobileMedia lied about its financial situation before declaring bankruptcy.
MobileMedia has until midyear to emerge from Chapter 11 bankruptcy reorganization. If the court approves the disclosure statement, the disclosure plan will go to the creditors, who must vote on it. If the reorganization plan is accepted, it then goes before the court again for final approval, after which the court sets an effective date that the transaction is made and the company exits Chapter 11.
Company leaders feel the reorganization can be a successful one. In a letter written to RCR earlier this year, Ronald Grawert, MobileMedia chief executive officer, and Joseph Bondi, chairman of the company’s restructuring effort and general manager of the turnaround firm Alvarez & Marsal Inc., said, “We expect to emerge from Chapter 11 later this year with one of the soundest balance sheets in the industry and strong prospects for growth.”
Some financial analysts agree. Jeanine Oburchay, a telecom analyst at Bear Stearns & Co., believes the reorganization might be effective. Under the proposed plan, MobileMedia would reduce its debt by about 80 percent and come out of Chapter 11 proceedings with $150 million in debt and the rest in equity. After factoring in the Debtor-in-Possession loan and other considerations, the company would have about $200 million in debt. With $100 million operating revenues, the debt-to-cash ratio is about 2: 1. “They would come out with the best debt ratio in the industry,” Oburchay said.
As such, she said MobileMedia could either be a prime consolidation target or even participate in acquiring another company. One popular reason why no one has offered to buy the paging carrier has been because the company’s debt load is too great.
Since filing for bankruptcy, Grossman said MobileMedia has improved its customer service, offered new services through a resale agreement with Mobile Telecommunication Technologies Corp. and began building a narrowband personal communications services network. MobileMedia has not yet awarded a vendor contract for that buildout, but hopes to have major markets up this year and the complete NPCS network buildout finished by next year.
The company also announced that it has moved its corporate headquarters from Ridgefield Park, N.J., to Fort Lee, just four miles away. MobileMedia will sublease about 54,000 square feet of office space, which the company said will save it about $1 million annually.
