Protocol Services emerges from Chapter 11

By Caroline Salls

Pittsburgh, Jan. 4 - Protocol Services, Inc. emerged from Chapter 11 bankruptcy as its plan of reorganization took effect Sunday, according to a Wednesday filing with the U.S. Bankruptcy Court for the Southern District of California.

Protocol did not need exit financing.

Under the plan, which was confirmed Dec. 23, the company will issue a new $60 million senior tranche A note and a new $25 million senior tranche B note to creditors.

Unsecured creditors will receive an 8.3% recovery through their share of $1.2 million, which will be payable quarterly beginning March 31 over four years.

The company also will issue 1 million new shares, 60% of which will be distributed to mezzanine A and mezzanine B lenders of the company's 13.5% series A senior secured subordinated notes and 30% series B senior secured subordinated notes.

The mezzanine lenders will also each receive one-half of redistributed stock to be turned over by senior lenders.

Treatment of creditors under the plan will include:

• Holders of $123 million in senior secured claims will receive new senior tranche A and tranche B notes, 60% of the new stock in reorganized Protocol and an $850,000 restructuring fee cash distribution;

• Holders of $61.7 million in mezzanine A secured claims and $34.6 million in mezzanine B secured claims will receive 40% of the new stock in Protocol and $260,000 in cash for restructuring fees and cash equal to the total amount of reasonable unpaid legal counsel fees and expenses. Each will also receive one-half of the redistributed stock to be turned over by senior lenders;

• Holders of $14.5 million in general unsecured claims will receive 8.3% recovery in a $1.2 million unsecured note;

• Holders of $1.7 million in convenience-class claims, which include general unsecured claims for less than $2,500 or claims for more than $2,500 whose holder has elected to treat them as convenience class claims, will recover the lesser of 25% of the claim in cash or its share of $0.8 million;

• Holders of old Protocol stock and interests will receive no distribution under the plan.

Protocol, a Deerfield, Ill.-based integrated direct marketing company, filed for bankruptcy July 26. Its Chapter 11 case number is 05-06782.

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