Cygnus Business Media makes pre-packaged Chapter 11 bankruptcy filing

By Caroline Salls

Pittsburgh, Aug. 3 - Cygnus Business Media, Inc. filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of Delaware to implement pre-packaged plan of reorganization that includes a debt-for-equity exchange.

The pre-packaged plan was approved by all three holders of $30 million in second-lien facility claims and 20 holders of $152.95 million in first-lien facility claims.

One holder of $5.89 million in first-lien facility claims voted to reject the restructuring plan.

According to the disclosure statement for the company's pre-packaged plan, Cygnus had planned to complete an out-of-court restructuring.

However, since the out-of-court restructuring required unanimous creditor consent, the dissenting vote cast by first-lien debtholder Genesis CLO 2007-2 Ltd. forced the bankruptcy filing.

Genesis CLO is a fund managed by Levine Leichtman.

Plan treatment

Plan creditor treatment will include:

• Holders of administrative claims and priority tax claims will recover 100% in cash;

• Holders of other priority claims and general unsecured claims will either be paid in full in cash or their rights to the claim will remain unaltered;

• Holders of other secured claims will either be paid in full in cash, their claims will remain unaltered or they will receive the collateral securing the claim;

• Holders of first-lien facility claims will recover up to 70% through a new $60 million term note due June 30, 2013 and new common stock in the reorganized company. Interest on the term note will be Libor plus 650 basis points, with a 3.25% Libor floor;

• Holders of second-lien facility claims will recover up to 4% in warrants to purchase 7,600 shares of new class A common stock at an exercise price of $450 per share;

• Intercompany claims will be discharged; and

• Series A, B, C and D preferred stock interests and other equity interests will be cancelled, with holders receiving no distribution.

The company said it plans to obtain $5 million in exit financing due June 30, 2013 to fund plan distributions.

Interest will be Libor plus 750 basis points, with a 3.25% Libor floor.

Debt details

According to court documents, Cygnus has $100 million to $500 million in both assets and debt. Specifically, the company said it has about $206 million in outstanding funded debt.

The company's largest unsecured creditors include GE Commercial Finance, based in Alpharetta, Ga., with a $173 million debt claim; Barclays Capital of New York, with a $33.13 million debt claim; and Publishers Press Inc. of Shepherdsville, Ky., with a $1.43 million trade claim.

Cygnus Business Media is a Fort Atkinson, Wis., publisher of business-to-business media products. Its Chapter 11 case number is 09-12765.

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