Metromedia International creditors committee asks court to appoint trustee, terminate exclusivity

By Caroline Salls

Pittsburgh, July 24 - Metromedia International Group, Inc.'s official committee of unsecured creditors has asked the U.S. Bankruptcy Court for the District of Delaware to appoint a Chapter 11 trustee to oversee the company's bankruptcy case and terminate its exclusivity, according to a Thursday court filing.

As an alternative, the committee said the court could dismiss Metromedia's Chapter 11 case.

According to the motion, the company and its controlling shareholder Salford Capital Partners, Inc. are trying to use Metromedia's Chapter 11 case to improperly reallocate value from some of the company's constituents at the expense of others.

In addition, the committee said Salford was an integral part of a consortium of buyers, in collaboration with Metromedia's former management, which tried to purchase substantially all of the company's assets in September 2006 without a vote of common stockholders.

The committee said that sale was supposed to be completed via a Metromedia bankruptcy filing, but the Delaware Chancery Court rebuked that effort because the proposed sale was structured for the sole purpose of avoiding a shareholder vote and the then highly solvent Metromedia would have had no valid reorganizational purpose.

The committee said Salford has now gone "back to the drawing board" nearly three years later after acquiring the company through a 2007 merger.

The committee said Salford effectively financed the acquisition by not paying preferred shareholders and "again leads a profoundly inequitable effort to use the Chapter 11 process for the primary purpose of benefiting itself and its co-investors at the expense of other MIG constituencies."

"Such bad faith conduct requires either the immediate appointment of a Chapter 11 trustee combined with the termination of MIG's exclusivity to file a plan in order to permit the committee to propose a plan that is in the best interest of creditors or, in the alternative, the immediate dismissal of this case," the committee said.

A hearing is scheduled for Aug. 21.

Metromedia is a Charlotte, N.C., communications company that filed for bankruptcy on June 18. Its Chapter 11 case was filed under the name MIG, Inc., case number 09-12118.

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