Haights Cross Communications makes pre-packaged bankruptcy filing

By Caroline Salls

Pittsburgh, Jan. 11 - Haights Cross Communications, Inc. filed for Chapter 11 bankruptcy Monday in the U.S. Bankruptcy Court for the District of Delaware to implement its pre-packaged plan of reorganization, according to a company news release.

As previously reported, the plan was approved by 100% of the holders of credit agreement and senior notes obligations, as well as by 90% of the holders of the company's senior discount notes.

"Today's action is the next step in the process to significantly reduce our debt and create a new capital structure that will better enable us to invest in our business and build on our industry leadership," Haights Cross president and chief executive officer Paul J. Crecca said in the release.

"Over the last several months, we have worked closely with our stakeholders to develop and now implement our plan to position Haights to meet the challenges of our industry.

"We plan to continue operations as normal through the Chapter 11 process, which we expect to conclude within 60 days."

The company entered into a plan support agreement on Sept. 3 with all of the lenders under the credit agreement and holders of roughly 80% in principal amount of the senior notes on the terms of a financial restructuring that would reduce Haights Cross' debt by $200 million to about $180 million and extend the maturity of the debt to no earlier than three years from the plan effective date.

General unsecured claims, including those of trade creditors, would be paid in full under the plan.

Plan terms

Under the pre-packaged plan:

• The reorganized company will issue $100 million in new three-year first-lien notes with an interest rate of Libor plus 1,000 basis points, with a 300 bps floor;

• The reorganized company will issue $80 million of new four-year second-lien notes with an interest rate of Libor plus 1,300 bps, with a 300 bps floor;

• All amounts owed under the company's credit agreement will be repaid in full in cash and new first-lien notes;

• Senior noteholders will receive a share of the new second-lien notes, 92% of the common stock in the reorganized company and proceeds of a rights offering;

• Holders of senior discount notes will receive a share of 8% of the new common stock, rights to purchase new common stock under the rights offering and three-year exit warrants if they vote to accept the plan;

• Holders of general unsecured claims and trade creditors will be paid in full; and

• Holders of common stock and other equity interests will receive no distribution.

The company said the $32.5 million rights offering would entitle each holder of a senior discount note to acquire new common stock in the reorganized company.

The exit warrants will allow holders to purchase up to 10% of the new common stock at a per-share strike price based on the total principal amount of the new first-lien notes, plus the total principal amount of senior notes and interest accrued on them through the bankruptcy filing date, less the net cash of the reorganized company in excess of $15 million on the plan effective date.

Cash collateral use

In connection with the bankruptcy filing, the company has requested court approval to use the cash collateral of its pre-bankruptcy lenders to fund its operations while in bankruptcy.

The cash collateral use would terminate in 45 days absent termination because of an event of default.

According to a 10-Q filed in August, Haights Cross had $232.39 million in assets and $418.12 million in debt at June 30, 2009. The company's bankruptcy petition listed $1 million to $10 million in assets and $100 million to $500 million of debt.

The company did not list any unsecured creditors with claims of $1 million or more.

Haights Cross is a White Plains, N.Y.-based educational and library publisher. Its Chapter 11 case number is 10-10062.

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