Penton Media files pre-packaged bankruptcy to restructure loans

By Caroline Salls

Pittsburgh, Feb. 10 - Penton Media, Inc. made its pre-packaged Chapter 11 bankruptcy filing Wednesday in the U.S. Bankruptcy Court for the Southern District of New York to implement a previously announced restructuring agreement with its lenders, according to a company news release.

As reported Tuesday, the restructuring will result in the elimination of $270 million of Penton's debt, and some of the company's existing shareholders have agreed to make a significant new investment, which will provide additional working capital to fund operations and improve Penton's overall liquidity.

Rights offering

Specifically, the investors have agreed to backstop a rights offering to the company's second-lien lenders to ensure that Penton will receive between $38.9 million and $51.2 million in cash through the rights offering.

Penton said $32.5 million of the rights offering proceeds will be used for liquidity and to fund transaction costs, while the balance will be used to fund cash distributions to second-lien lenders.

The second-lien debt will be eliminated under the plan in exchange for 15% of the principal amount in cash, or, at the election of the second-lien lenders, stock in the reorganized company equal to 15% of the loan debt.

The equity sponsors have agreed to take only new stock in exchange for their second-lien debt.

Loan changes

The restructuring agreement also provides for an extension of the maturity on the company's senior secured credit facility through 2014.

The term loan portion of the credit facility will be increased to $625.29 million from $602.95 million, while the revolving credit facility portion will be reduced to $42.66 million from $80 million.

Interest on the amended facility will be Libor plus 300 basis points with a 1% Libor floor, up from Libor plus 225 bps with no floor.

The company said 1% of the interest on the amended facility will be paid in kind through Feb. 1, 2013, with a toggle feature, while 2% will be paid in kind from Feb. 1, 2013 through the April 1, 2014 maturity date, also with a toggle feature.

Plan treatment

Plan creditor treatment will include:

• Holders of priority claims will be paid in full in cash;

• Holders of first-lien term loan claims and first-lien revolver claims will be treated in accordance with the amended and restated first-lien loan documents;

• Holders of second-lien claims will receive either cash or stock equal to 15% of their claims and be eligible to participate in the rights offering;

• Other secured claims, intercompany claims and subsidiary debtor equity interests will be reinstated;

• Holders of general unsecured claims will be paid in full in cash;

• Holders of holding company equity interests will receive no distribution; and

• Holders of holding company investor equity interests will, if requested by the reorganized company, retain those interests in lieu of receiving stock in connection with the second-lien lender elections. The retained interests will be valued in the same manner as the stock offered in the rights offering. Otherwise, the interests will be extinguished.

According to the release, the plan has been approved by the required number of lenders but is still subject to bankruptcy court approval. Penton said it has asked the court to schedule a confirmation hearing for early March.

In connection with the bankruptcy filing, the company has requested court approval to use the cash collateral of its pre-bankruptcy lenders to fund its operations while in bankruptcy.

The cash collateral use will expire on the earlier of May 3 or the effective date of the plan of reorganization.

Debt details

Penton listed $500 million to $1 billion in assets and more than $1 billion in debt.

The company's largest unsecured creditors are Worldcolor USA Corp. of Chicago with a $1.6 million trade debt claim and R R Donnelley Receivables Inc. of Charlotte, N.C., with a $1.41 million trade debt claim.

Penton is a New York-based business-to-business media company. The Chapter 11 case number is 10-10689.

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