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January 8, 2019 – TMI Trust Company (“TMI”), in its capacity as trustee for the Debtors’ 11% Senior PIK Toggle Notes due April 30, 2022 (the “PIK Notes”), filed an objection [Docket No. 283] to the Debtors’ Disclosure Statement [Docket No. 278]. Cowen and Company, LLC joined TMI in its objection [Docket No. 284]. TMI argues that the Disclosure Statement is objectionable on two grounds, (i) it is deficient from an information perspective and (ii) it suffers from a poor sense of timing, ie TMI wonders why the Debtors are rushing out a Disclosure Statement when so many still open issues stand to be resolved in the near term. “There is no melting ice cube to warrant sending such a deficient Disclosure Statement” is TMI’s bewildered summation. TMI further stresses that it holds cards that stand to block any Plan, at least as to certain Debtors. The PIK Notes, in respect of which it serves as trustee, constitute the entirety of impaired Class 6 and represent about $28mn of the Debtors’ total prepetition debt of $530mn.
The TMI objection states, “The Disclosure Statement should not be approved because it fails to provide adequate information for the Debtors’ unsecured creditors, including but not limited to the unsecured creditors of LBI Media Holdings, Inc. (‘Holdco’) and of LBI Media Intermediate Holdings, Inc. (‘Intermediate Holdco’), with respect to the Debtors’ financial condition, the existence and amount of potential Administrative Claims, the existence and validity of potential Intercompany Claims, the nature of the investigation into potential D&O claims and the releases proposed under the Plan, the assets potentially available at Holdco and Intermediate Holdco for distribution to their creditors, and the impact of an Alternative Transaction on potential distributions to unsecured creditors.
The Debtors have also failed to explain the rationale for proceeding with the Disclosure Statement at this point and under the requested schedule when so many significant events are imminent: The First Lien Notes Refinance Option will be exercised by or expire on January 17, the general bar date is January 22, and bids are due in the Debtors’ marketing process on February 4…There is no melting ice cube to warrant sending such a deficient Disclosure Statement and Plan out for voting (particularly on the proposed schedule, which seeks a voting deadline before the end of the UCC’s investigation period and the confirmation hearing only three days after). Rather, the passing of these milestones will clarify how these cases will progress and potentially address the deficiencies in the Disclosure Statement. Further, the Plan is not confirmable for at least some of the Debtors without acceptance by Class 6, which is comprised solely of claims relating to the unsecured notes issued by Intermediate Holdco for which TMI is trustee. In particular, Class 6 is the only class at Intermediate Holdco, and it is doubtful that there will be an accepting impaired class at Holdco without Class 6. The Disclosure Statement does not provide Class 6 adequate information, however, to make an informed judgment on its treatment under the Plan. In addition, the proposed cross-class cross-debtor deathtrap for Class 5 and Class 6 claims cannot be approved. At a minimum, the Disclosure Statement should be amended to discuss the impact on related Debtors if the Plan for Intermediate Holdco and/or the Plan for Holdco is not confirmed.”
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