Publisher American Media Declares Bankruptcy

American Media, publisher of several major U.S. newspapers and magazines, filed for Chapter 11 bankruptcy protection with the Manhattan bankruptcy court on October 17.

The Boca Raton, Florida-based company posted liabilities of $500 million to $1 billion, but had under $50,000 in assets. However, its assets were estimated at $100 million to $500 million by a subsidiary for operations.

The publisher said the filing was part of its financial restructuring, having already reached a deal with holders for up to 75% of its debt in bonds and secured lenders for 70% of bank liabilities.

Representatives also said the company was following a pre-packaged plan for the bankruptcy, although such a plan had yet to be submitted to the court the afternoon of the filing.

A press release by American Media said that the restructuring plan would hand ownership of the company over to its bondholders, which include Avenue Capital Group, Angelo Gordon & Co., and Capital Research.

Angelo Gordon & Co., which holds 20% of the shares, had recently provided additional funds to support the company, according to American Media representatives. Avenue Capital Group holds another 20% of the firm, while Capital Research holds 30%.

The deal would also fully reimburse unsecured trade creditors, and pay back secured lenders both in new debt and cash.

Court reports show that the company will be taking on first-lien and second-lien debts totaling $565 million to help it emerge from bankruptcy protection. CEO David Pecker says the company expects to exit bankruptcy in two months.

American Media has struggled with excessive debt for over two years. In January 2009, it was forced to restructure and give up 95%of its equity to bondholders.

 

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