Ascent 4% convertibles holders’ complaint says exchange offer harmful

By Wendy Van Sickle

Columbus, Ohio, Sept. 7 – Holders purporting to own about 69% of Ascent Capital Group, Inc.’s convertible senior notes due 2020 filed an amended complaint in the Court of Chancery of the State of Delaware on Wednesday, claiming that Ascent’s participation in an exchange offer for some Monitronics International, Inc. notes would cause Ascent to become insolvent, if consummated, according to an 8-K filing with the Securities and Exchange Commission.

Ascent and Monitronics began on Aug. 30 an offer to exchange Monitronics’ existing $585 million of 9 1/8% senior notes due 2020 for cash and/or new notes and warrants to purchase Ascent’s series A common stock, as previously reported.

The offer is set to expire at 11:59 p.m. ET on Oct. 3.

The amended complaint, which was filed against Ascent and each of its directors and executive officers, claims that the exchange offer would result in a breach of Ascent’s directors’ fiduciary duties to Ascent and “constitute a constructive or intentional fraudulent transfer by using assets of Ascent necessary for the repayment of the notes to purchase outstanding” Monitronics senior notes.

Ascent and Monitronics are offering up to $100 million in cash from Ascent and/or a combination of $585 million of new Monitronics 7¾%/3¾% senior unsecured cashpay/PIK notes due 2023 and, for each $1,000 principal amount of old notes, one warrant for 2.64 shares of Ascent’s series A common stock at an exercise price of $5.00 for each whole share.

The amended complaint seeks an injunction preventing Ascent from participating in the exchange offer.

The complaint also seeks a declaratory judgment that approval of the exchange offer constitutes a breach of fiduciary duty by Ascent’s directors and that consummation of the offer would amount to a fraudulent transfer by Ascent.

The plaintiffs are seeking expedited consideration of their motion for a preliminary injunction.

On Aug. 27, holders purporting to represent about 68% of the Ascent convertible notes filed a complaint in the Delaware court alleging that Ascent was planning a transaction that would be detrimental to the company and that would result in it becoming insolvent, if consummated.

At that time, Ascent said it “believes that the claims in the complaint are meritless” and that the company “intends to vigorously defend against this action.”

Ascent Capital is a holding company based in Englewood, Colo. Its primary subsidiary operates as Brinks Home Security, a home security and alarm monitoring company based in Dallas.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.