Summit Business Media files bankruptcy; lenders support restructuring

By Caroline Salls

Pittsburgh, Jan. 26 - Summit Business Media filed Chapter 11 bankruptcy Tuesday in the U.S. Bankruptcy Court for the District of Delaware after receiving approvals from 83% of its lenders for a debt restructuring that will cut the company's outstanding debt by more than half, or roughly $135 million, according to a company news release.

Summit said the restructuring will also significantly enhance its financial position.

Restructuring terms

Under the proposed restructuring:

• The company's first-lien debt will be restructured into a $110 million term loan facility. The balance of the first-lien debt will be canceled, and the debtholders will receive shares of exit term debt and 89.44% of the reorganized company's new equity;

• Summit will also receive an up to $6 million revolving credit exit facility, with the initial draw to be used to repay any amounts outstanding on the company's debtor-in-possession financing on the plan effective date. The initial draw is expected to be $1 million;

• The company's second-lien debt will be canceled in its entirety and holders will receive $1 million in cash, 5.56% of the new equity and rights to receive the equivalent of additional new equity;

$100,000 will be distributed to general unsecured creditors; and

• All of the company's pre-bankruptcy equity interests will be canceled and holders will receive no distribution.

The company expects to emerge from bankruptcy during the first half of 2011, and the plan calls for continuation of Summit's normal operations.

"Summit Business Media is a fundamentally sound and profitable company," president and chief executive officer Andrew L. Goodenough said in the release.

"We believe that Summit is well-positioned to take advantage of economic growth coming out of this unusually deep downturn as the industries we serve rebound.

"While Summit has emerged from the downturn as a smaller but healthier company, we have too much debt to support our current business operations, left over from when Summit was a larger, acquisition-oriented company.

"We view this reorganization process as the last step in a two-year strategic refocusing of Summit on our core markets."

Bankruptcy financing

Subject to court approval, Summit will use its bank balances, currently more than $10 million in cash, and cash flow from its operations to meet its working capital needs throughout the reorganization process.

In addition, the company's lenders have agreed to provide a $5 million debtor-in-possession credit facility to support additional working capital needs, if any, during the restructuring.

Bank of Montreal, Chicago Branch is the DIP loan agent.

The DIP facility will mature on the earliest of one year from the bankruptcy filing date, the effective date of a plan of reorganization, 30 days after the plan is confirmed, upon the sale or transfer of a substantial portion of the DIP collateral, 60 days after the interim order if a final order is not entered and upon occurrence of an event of default.

Interest will be Libor plus 800 bps with a 2% floor.

Summit is seeking interim access to $2.5 million of the DIP financing.

Debt details

According to court documents, Summit has $100 million to $500 million in both assets and debt. As of Tuesday, the company said it had $252 million in unpaid pre-bankruptcy debt and general unsecured claims.

The company's largest unsecured creditor is Wind Point Investors VI, LP and Wind Point Investors V, LP of Chicago, with a $4.13 million management fees claim. Summit did not list any other unsecured creditors with claims of $1 million or more.

Summit Business Media Holding Co. is owned by Wind Point Partners VI, LP and Wind Point Partners V, LP.

Reed Smith is legal counsel to Summit Business Media for the restructuring and Lincoln International is acting as financial adviser.

Summit is a Seven Hills, Ohio, business-to-business media company. The Chapter 11 case number is 11-10231.

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