Go to the website of a company that has recently emerged from Chapter 11bankrupt
ID: 2328454 • Letter: G
Question
Go to the website of a company that has recently emerged from Chapter 11bankruptcy—for example, Houghton Mifflin Harcourt (HM Holdings, Inc.) at www.hmhco.com or the Tribune Company at www.tribune.com. By doing a search of the website or by looking at areas such as “Investor Relations” or “About Us,” what information can you determine about the bankruptcy plan that was approved?
Then go to the Securities and Exchange Commission website (www.sec.gov) and click on “Search for Company Filings” under “Filings.” Then click on “Company or Fund Name” and enter the name of the same company. After you receive a list of filings, click on the most recent 10–K form. What information is available from this source about the bankruptcy reorganization plan?
Finally, if available, go to an online index of business publications or obtain a hard copy index of The Wall Street Journal. Again, search for available information concerning this company's bankruptcy reorganization plan.
Required
Based on these searches:
1.
What were the main provisions of the bankruptcy reorganization plan that brought the company out of Chapter 11?
2.
Which of these sources provided the best information?
1.
What were the main provisions of the bankruptcy reorganization plan that brought the company out of Chapter 11?
2.
Which of these sources provided the best information?
Explanation / Answer
(1) Main provisions of the bankruptcy reorganization plan that bought the company out of Chapter 11:
Refer to the HMH Inc. form 10-K from SEC filings to list out the main provisions of its bankruptcy reorganization plan as below:
(1) A debt amounting to $3.1 billion would be eliminated. Thereby their annual interest expenses would be reduced by $250 million approximately.
(2) The existing bank would be converted and bond debt into 100% of the equity in the reorganized company. Trade and other unsecured creditors will be paid in full and existing equity holders would receive warrants exercisable at 5% of the new equity.
(3) The $500 million DIP facility will be converted into an exit facility.
(4) The tenure of the term loan facility will be extended to six-year maturity that has a 101 soft call for one year.
(5) The term loan would finally be priced at L+600, with a 1.25% LIBOR floor, and was offered at 98.
(6) The company’s pre-petition debt consisted of a $236 million revolver due 2013, and $300 million of 10.5% first-lien notes due 2019.
(2) Sources provided the best information:
The following are the sources that provide the best information regarding the reorganization plan:
(a) Stakeholders including the creditors and other preferential parties to the organization.
(b) The internet sources that provides the market information of the company.
(c) The filings made by the company with the SEC.
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