Heartland Publications' plan confirmed; emergence possible by April 30

By Lisa Kerner

Charlotte, N.C., April 16 - Heartland Publications, LLC announced that its amended, pre-negotiated plan of reorganization was confirmed by the U.S. Bankruptcy Court for the District of Delaware at a hearing on Friday.

No creditors voted against the plan prior to the hearing.

Heartland expects the plan to become effective on or about April 30, at which time it will emerge from Chapter 11.

"We will soon complete this process and emerge with nearly half of our prior debt eliminated," said president and chief executive officer Michael C. Bush.

Under the pre-negotiated plan, $70 million of existing first-lien debt would be exchanged into two term loans of $60 million and $10 million, respectively.

As previously reported, the company filed for bankruptcy on Dec. 21 after reaching an agreement with the majority of its first-lien lenders, led by General Electric Capital Corp., on a financial restructuring that would cut the company's debt by more than half and create a new capital structure.

The new term loans would mature on the fourth anniversary of the plan effective date.

Interest on the term loan A will be either the Index rate plus 550 basis points or Libor plus 650 bps, with a 3.5% Libor floor, at the reorganized company's option. The term loan B will accrue paid-in-kind interest at a rate of 11% and cash interest at a rate of 1%.

In addition, the first-lien lenders would be entitled to 90% of the equity in the reorganized company.

Creditor treatment

Creditor treatment will include:

• Holders of administrative claims, priority tax claims and priority non-tax claims will be paid in full in cash;

• Holders of other secured claims will recover 100% either in cash or the return of the collateral securing the claim;

• Holders of first-lien claims will receive the senior term loans and class A/B common interests. These creditors can also elect to receive their class A/B common interests in the form of class B limited voting common interests;

• Holders of second-lien claims will receive class D limited voting common interests if they vote to accept the plan. If these creditors reject the plan, they will receive no distribution;

• Holders of general unsecured claims will be paid in full in cash, provided, however, that if holders of second-lien claims vote to reject the plan and the court determines in response to an objection filed by a holder of a second-lien claim that leaving the general unsecured creditors unimpaired violates the Bankruptcy Code, then holders of general unsecured claims will receive no distribution and will be deemed to have voted to reject the plan; and

• Interest holders will receive no distribution, provided, however, that if the second-lien creditors vote to accept the plan, interest holders will receive a share of warrants.

Heartland is a Clinton, Conn.-based newspaper operator. Its Chapter 11 case number is 09-14459.

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