Chapter 11 Bankruptcy

Penton Business Media Holdings Inc. filed for Chapter 11 bankruptcy protection in hopes that the company can reduce the large amount of debt it incurred when the company bought trade-magazine publisher Penton Media Inc. three years ago.  Penton Business Media came to its bankruptcy decision after it became apparent it may not be able to pay its debts.  Penton Business and Penton Media filed Chapter 11 Bankruptcy with a prepackaged bankruptcy plan.

According to the plan, the company will get “various covenant and other relief” under its first-lien credit agreement. The maturity of the credit agreement, under which the company owes approximately $668 million, will also be extended by 18 months to August 2014.

The company’s $270 million second-lien debt will be eliminated in exchange for 15% of the principal amount of such debt in cash, or stock in the reorganized company valued at 15% of such debt. However, equity sponsors that hold second-lien debt will only get paid in stock.

The company’s equity sponsors have also agreed to ensure that the company will receive between $38.9 million and $51.2 million in cash in a rights offering to help with liquidity and fund the distributions to second-lien lenders that elect to take cash.

Fortunately for Penton Business Media Holdings, the company was able to rally enough creditor votes to almost guarantee bankruptcy court approval for the restructuring plan.  When the prepackaged bankruptcy plan is approved, Penton Business hopes to emerge from Chapter 11 bankruptcy in no more than 30 days.  Prepackaged Chapter 11 bankruptcies are becoming more common during this recession as many companies hope to expedite the bankruptcy process and emerge more viable and competitive.

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