Judge Shelley C. Chapman of the U.S. Bankruptcy Court for the Southern District of New York in Manhattan on Wednesday, Oct. 3, approved Broadview's disclosure statement and confirmed its prepackaged reorganization plan. Also on Wednesday, Chapman authorized Broadview to enter into a $25 million exit loan agreement. The loan from lenders led by CIT Group/Business Credit Inc. could be increased by $10 million.
Debtor counsel Rachel C. Strickland of Willkie Farr & Gallagher LLP said the plan will take effect in mid- to late October. She said the Rye Brook, N.Y., company awaits approval from the Federal Communications Commission due to the change in control of the company in its debt-for-equity swap.
Broadview's plan reduces the company's senior secured notes from $300 million to $150 million and cuts annual interest expenses by $18 million, according to a Wednesday company statement.
"Our financial restructuring resolves our debt maturity issues and provides a more appropriate capital structure for the company," Broadview president and CEO Michael K. Robinson said in the statement. "I would like to thank all of Broadview's customers, employees, trading partners, debt and equity stakeholders and our current board of directors for their continued support during our restructuring process. The entire team at Broadview is excited about our greater financial flexibility, allowing us to invest in growth opportunities and further expand our market position in cloud-based services."
Broadview and 27 affiliates filed for Chapter 11 on Aug. 22 after reaching the terms of a restructuring and then soliciting votes on a prepackaged plan. Holders of two-thirds of its 11.375% senior secured notes due Sept. 1 and 70% of its preferred equity holders initially agreed to back the restructuring, which Broadview said was necessary to enable repayment of the notes.
After reaching the agreement on July 13, Broadview solicited votes from other creditors on its prepackaged plan. Some 80% of noteholders in dollar amount and 95% in number accepted the plan, according to a declaration by Robinson. In addition, 99.99% of preferred equity holders also cleared it. Only one significant holder of senior secured notes submitted a ballot rejecting the plan.
Under the deal, senior secured noteholders will receive a pro rata share of 97.5% of Broadview's common stock and $150 million of new 10.5% senior secured notes due 2017.
Broadview extended $210 million in senior secured notes on Aug. 23, 2006, and $90 million in additional notes on May 14, 2007. The notes were due Sept. 1 and accrue interest at 11.375%. Bank of New York Mellon Corp. is the trustee and collateral agent for the notes.
Preferred equity holders will receive the remaining 2.5% of common shares plus two series of eight-year warrants to purchase up to 11% and 4% of shares, respectively. Broadview estimated the value of their recovery at $14.6 million.
Existing equity interests will be canceled. Court papers show MCG Capital Corp. owned 50.9% of common shares on the petition date, as well as 100% of Series A and Series A-1 preferred shares. Baker Communications Fund LP owned 16.2% of common shares plus 41.8% of Series B preferred shares and 35.4% of Series B-1 preferred shares.
Broadview will fund working capital and its emergence from bankruptcy with the all-new-money exit loan. The financing, proposed Sept. 19, accrues interest at a base rate plus 175 basis points or Libor plus 275 basis points and will carry a 0.5% commitment fee, a $25,000 agent fee, a 0.5% unused line fee and a 3% letter of credit fee. The loan will mature five years from closing.
CIT was also the administrative agent for Broadview's $25 million debtor-in-possession loan. The exit loan, however, does not roll up the DIP, which is repaid under the plan.
The DIP rolled up the $13.9 million outstanding on a $25 million prepetition revolver from CIT, with the remainder of the DIP constituting new money.
Broadview provides cloud-based services, voice and data communications services and other IT products. The company focuses on markets in 10 states in the Northeast and mid-Atlantic region. Broadview has about 34,000 customers in a variety of industries.
It leases 15 facilities in Massachusetts, New Jersey, New York, Pennsylvania and Washington. Broadview also collocates equipment with its competitors at 260 locations.
Evercore Group LLC is Broadview's financial adviser.
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