Cengage Learning request for plan-related mediation approved by court

By Caroline Salls

Pittsburgh, Sept. 25 - Cengage Learning, Inc.'s motion to schedule mediation related to confirmation of its plan of reorganization was approved Wednesday by the U.S. Bankruptcy Court for the Eastern District of New York.

Judge Robert D. Drain of the U.S. Bankruptcy Court for the Southern District of New York was appointed as mediator.

The results of the mediation will be non-binding.

As previously reported, Cengage said it filed a plan and disclosure statement on Aug. 16 that, if approved, would allow it to emerge from bankruptcy by the end of the year.

However, the company said it believes that further progress requires a clear and definitive process to be established to address the critical issues in its Chapter 11 cases.

Cengage said its official committee of unsecured creditors asked the court to hold the disclosure statement hearing no earlier than Oct. 27 and the plan confirmation hearing no earlier than Dec. 10.

While this schedule would allow it to emerge from bankruptcy by the end of the year, the company said the debtors "firmly believe that this can only be accomplished if a definitive schedule is set and a mediator is appointed."

Mediation topics

According to Wednesday's order, the mediation can cover issues related to the allocation of estate value among the various creditor constituencies and the terms of a plan of reorganization.

Specifically, disputes to be mediated include the following:

• The total enterprise value of the Cengage debtors;

• Foreign and domestic subsidiary valuation;

• Disputes related to copyrights and the terms of any licensing arrangements proposed in the company's plan;

• Whether the first-lien lenders can assert their total claim against each debtor;

• Whether the first-lien lenders have any valid or perfected liens on the debtors' cash;

• Disputes related to a 2007 leveraged buyout;

• Disputes related to a March 2013 revolver draw and the debtors' use of the proceeds of that draw;

• Disputes related to substantive consolidation;

• Issues regarding Apax Partners, LP;

• Whether specified intercompany obligations are properly classified as debt or equity or subject to equitable subordination or other claims or defenses, as well as other intercompany issues;

• Intercreditor issues, including an Apax Partners declaratory judgment complaint, rights under the intercreditor agreements and claims made by various parties of breach of the intercreditor agreements;

• Issues regarding the trust structure of the debtors' plan, governance of the trust and the proposed use, sale or lease of any assets placed in trust; and

• Other plan confirmation or other issues appropriate for mediation.

Cengage, a Stamford, Conn.-based provider of teaching, learning and research services for the academic, professional and library markets, filed for bankruptcy on July 2. The Chapter 11 case number is 13-44106.

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