Heartland Publications emerges from pre-packaged bankruptcy case

By Caroline Salls

Pittsburgh, April 30 - Heartland Publications, LLC was scheduled to emerge from Chapter 11 bankruptcy on May 1, according to a company news release.

The company said the emergence follows the April 16 confirmation hearing at which no creditors voted against its pre-packaged plan of reorganization.

"The reorganized company is well positioned for success," president and chief executive officer Michael C. Bush said in the release.

"Even throughout the Chapter 11 process, Heartland's performance has continued to improve as our dedicated employees have remained focused on serving our communities and advertisers.

"In fact, Heartland's operating profit for the first quarter of 2010 is up more than 10% over the first quarter of the prior year.

"March revenues exceeded revenue year-over-year, and we expect full-year 2010 to exceed 2009."

As previously reported, Heartland's plan exchanges $70 million of existing first-lien debt into two term loans of $60 million and $10 million, respectively, plus an additional $2 million revolving credit facility.

Equity in the company will be dedicated primarily to the first-lien lenders, with smaller percentages reserved for the second-lien claimholders and some members of management.

These shares are being distributed immediately, and will replace any old shares, which will be cancelled.

The plan also calls for the payment in full to general, unsecured claims, which are primarily trade-related claims. These disbursements are scheduled to be made within the next two weeks and completed within 60 days on undisputed claims.

Management of the company continues as before, and Michael Bush will remain a member of the new five-member board of directors.

"With a stronger balance sheet, we also intend to pursue growth opportunities through acquisitions," Bush said in the release.

"Specifically, we will be reviewing opportunities in communities adjacent to our existing operations."

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;

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

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

Heartland, a Clinton, Conn.-based newspaper operator, filed for bankruptcy on Dec. 21 in the U.S. Bankruptcy Court for the District of Delaware. Its Chapter 11 case number is 09-14459.

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