MTS files prepackaged Chapter 11

By Jeff Pines

Washington, Feb. 9 - MTS, Inc. filed a prepackaged reorganization under Chapter 11, according to Feb. 9 filings with the U.S. Bankruptcy Court for the District of Delaware.

The plan calls for converting the company's $110 million of senior debt to $30 million of new senior notes and an 85% equity position in the company. Existing stockholders would retain the remaining 15%. The new notes will mature in 2005 and pay a 2% cash coupon plus, at the company's option, 8% in cash or 10% to be capitalized as principal.

The existing notes were costing the company $10 million a year in interest and management did not think the notes could have been refinanced.

The company says the prepackaged Chapter 11 is the last phase in its restructuring, which began in 2001's third quarter.

West Sacramento, Calif.-based MTS, best known for its Tower Records subsidiary, said it has the approval of the holders of its 9 3/8% senior subordinated notes due 2005. The largest bondholders include AIG Investment Group, Banc One High Yield Partners, Barclays Capital Inc., Bear Stearns Securities Corp., Citicorp, Columbia Management Group, Goldman Sachs, Greyhen Partners, Highland Capital Management, Quattro Fund Ltd., the State of South Dakota Retirement System Fund and UBS Financial Services.

MTS needs at least two thirds by dollar value of the bondholders and at least half by number to accept the plan to go forward. With more than 97% of the bondholders and 100% of the stockholders already agreeing to the plan, MTS is confident there will be no problem obtaining approval.

"Court approval of the pre-packaged plan will reduce existing debt by $80 million, effectively eliminating the financial risks that have faced Tower for the past three years," said Tower chief executive officer E. Allen Rodriguez in a press release. "Our issues are financial, not operational."

MTS has total debt of about $250 million. U.S. Bank as indenture trustee for the $110 million notes of notes outstanding is the largest creditor

The largest vendor claim belongs to Universal Music & Video of Fishers, Ind. It has a $15.62 million trade against the company. WEA Distribution, of Burbank, Calif. follows with the next largest trade claim for $13.7 million.

MTS listed the book value of its assets at $262 million.

The company expects to emerge from Chapter 11 within 45-60 days.

The CIT Group/Business Credit, Inc. and others have already agreed to amend the company's financing to provide up to $100 million debtor-in-possession financing. MTS estimates the DIP will give it $14 million more in liquidity than its prepetition facility.

CIT Group has agreed to provide up to $100 million in a term and revolving financing facility.

The case number is 04-10394.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.