PRC obtains court approval of disclosure statement; objections are withdrawn, overruled

By Rebecca Melvin

New York, May 8 - PRC LLC received approval on Thursday of its disclosure statement, after two objections were withdrawn, and despite a third that was raised, but overruled by the U.S. Bankruptcy Court for the Southern District of New York.

Judge Martin Glenn said the third objection by unsecured creditor IAC/InterActiveCorp. was a legal matter relating to discriminatory treatment that may be valid for a vote against confirmation, but not for addressing the adequacy of disclosure.

"Is there something unclear about the treatment of IAC?" Martin asked attorneys representing IAC.

A plan confirmation hearing remained scheduled for June 19.

IAC, which is the former owner of PRC, has filed a proof of claim against the company in excess of $22 million. In the disclosure statement, IAC is not considered a trade creditor, but PRC has reserved a $2.6 million payment for IAC.

ACE Insurance and Verizon also filed objections that were withdrawn.

In its objection, IAC states the "proposed settlement" set forth in a supplement to the disclosure statement ironically is positioned as a remedy to unequal treatment of creditors. It increases the cash available for unsecured claims by $900,000, waives avoidance actions against all trade creditors except for IAC; and provides that the creditors' committee and the company will cooperate to prosecute objections to certain unsecured claims, among other things. But IAC's treatment is discriminatory and unfair, the objection states.

PRC attorney Alfredo Perez of Weil Gotshal & Manges said IAC is not a typical trade creditor as it sold the assets to PRC, it has a service agreement with PRC, a deferred purchase price, and guarantee the obligations related to telecommunications provider AT&T.

The PRC disclosure statement says that based on estimates, the plan provides for 67% to 74% recovery to holders of allowed prepetition first-lien claims, 0% to 3% recovery to holders of allowed prepetition second-lien claims, 4% to 8% recovery to holders of allowed general unsecured claims, and no recovery for holders of preconfirmation equity interests.

In addition, the plan is supported by the company's prepetition lenders and the creditors committee, the disclosure statement states. IAC is a member of the creditors committee.

Under the plan, the prepetition first-lien claims, or class 4, will be satisfied in full, as follows: (i) $40 million of allowed prepetition first-lien claims will be rolled over as part of the post-confirmation second-lien facility; (ii) an additional $40 million of the allowed prepetition first-lien claims will be exchanged for a post-confirmation unsecured note to be issued by post-confirmation intermediate, HoldCo; and (iii) the remaining balance of the allowed prepetition first-lien claims will be converted to 80% of the equity interests of post-confirmation Holdco.

Also prepetition second-lien claims, or class 5, will be satisfied in full under the plan, as follows: (i) all of the outstanding allowed prepetition second-lien Claims will be converted to 20% of the equity interests of Postconfirmation Holdco (subject to dilution), and (ii) each holder of an allowed prepetition second-lien claim will receive certain warrants.

And each holder of an allowed general unsecured claim, or class 6, will receive its distribution pro rata share of $1.35 million in cash on each distribution date or soon thereafter.

In addition, classes 1, 2, and 3 are unimpaired under the plan, the disclosure states. And class 7, or equity interests, will be cancelled on the plan effective date.

Based in Plantation, Fla., PRC is a provider of customer-relationship management services. It filed a pre-packaged Chapter 11 bankruptcy case on Jan. 23. Its Chapter 11 case number is 08-10239.

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