Protocol Services files third amended plan; to issue $60 million tranche A note, $25 million tranche B note

By Caroline Salls

Pittsburgh, Nov. 16 - Protocol Services, Inc. filed its third amended plan of reorganization and related disclosure statement Tuesday with the U.S. Bankruptcy Court for the Southern District of California that changes the amount of the new senior tranche A and senior tranche B notes to be distributed under the plan.

Under the third amended plan, the company will issue a $60 million new senior tranche A note and a $25 million new senior tranche B note.

Protocol will also issue a $1.2 million unsecured note to fund the unsecured creditors' trust.

Unsecured creditors will receive the $1.2 million note, regardless of whether they vote to accept or reject the plan.

Under the previous plan, the company would have issued a $90 million new senior tranche A note and a new senior tranche B note in an amount equal to the difference between the secured claim of the senior lenders and the principal amount of the new senior tranche A note.

The company will also issue 1 million new shares, 60% of which will be distributed to mezzanine A and mezzanine B lenders of the company's 13.5% series A senior secured subordinated notes and 30% series B senior secured subordinated notes.

Treatment of creditors under the plan will include:

• Holders of $123 million in senior secured claims will receive new senior tranche A and tranche B notes, 60% of the new stock in reorganized Protocol, an $850,000 restructuring fee cash distribution and payment of professional fees and expenses incurred by the senior lenders.

• Holders of $61.7 million in mezzanine A secured claims and $34.6 million in mezzanine B secured claims will receive 40% of the new stock in Protocol, and they will receive $260,000 in cash for restructuring fees and cash equal to the total amount of reasonable unpaid legal counsel fees and expenses.

• Holders of $14.5 million in general unsecured claims will receive 8.3% recovery in a $1.2 million unsecured note.

• Holders of $1.7 million in convenience- class claims, which include general unsecured claims for less than $2,500 or claims for more than $2,500 whose holder has elected to treat them as convenience class claims, will recover the lesser of 25% of the claim in cash or its share of $800,000.

• Holders of old Protocol stock and interests will receive no distribution under the plan.

According to the plan, Protocol does not expect to need exit financing.

A hearing to approve the disclosure statement is scheduled for Nov. 22.

Protocol, a Deerfield, Ill.-based integrated direct marketing company, filed for bankruptcy on July 26. Its Chapter 11 case number is 05-06782.

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