Granite Broadcasting preferred equity holders object to lack of information in disclosure statement

By Caroline Salls

Pittsburgh, Feb. 8 - Granite Broadcasting Corp.'s preferred equity holders objected to the company's disclosure statement for its pre-packaged plan of reorganization, according to a Thursday filing with the U.S. Bankruptcy Court for the Southern District of New York.

The preferred equity holders include Harbinger Capital Partners Master Fund I, Ltd., GoldenTree High Yield Master Fund II, Ltd. and MFC Global Investment Management (U.S.), LLC, which together hold more than 50% of Granite Broadcasting's 12.75% cumulative exchangeable preferred stock.

According to the objection, the disclosure statement fails to include critical information concerning the company's past and current marketing efforts to solicit third-party investors, the data underlying the company's valuation and the nature and purpose of the proposed payments to senior management under the plan.

In addition, the preferred equity holders said the disclosure statement does not provide enough information on the reduced amount of Malara Broadcast Group's obligations to the company and the consequences of the "inevitable failure of the proposed plan" should the court rule that either the enterprise value of the estates is higher than the valuation provided in the plan or the distributions to the common shareholders and chief executive officer W. Don Cornwell under the proposed plan are in violation of the absolute priority rule.

The preferred equity holders also said the proposed disclosure statement says the plan recoveries are based on a valuation analysis, which concludes that the total enterprise value of the company and its non-debtor subsidiaries is less than the amount of Granite Broadcasting's secured debt.

The preferred equity holders said this entitles the secured creditors to the entire economic value of the company's estates, with no residual value to unsecured creditors and equity holders.

A hearing on approval of the disclosure statement is scheduled for Tuesday.

Granite, a New York-based owner and operator of network-affiliated television stations, made a prepackaged Chapter 11 filing on Dec. 11. Its Chapter 11 case number is 06-12984.

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