Granite Broadcasting preferred equity holders look to delay plan effectiveness pending appeal

By Caroline Salls

Pittsburgh, May 24 - Granite Broadcasting Corp.'s preferred equity holders asked the U.S. Bankruptcy Court for the Southern District of New York to delay the effective date of the company's plan of reorganization pending the outcome of an appeal of the plan confirmation order, according to a Wednesday court filing.

The preferred equity holders, including Harbinger Capital Partners Master Fund I, Ltd., GoldenTree Master Fund II, Ltd. and MFC Global Investment Management (U.S.), LLC, said if the plan is allowed to take effect before the appeal is heard, the appeal will most likely be dismissed as moot.

The preferred equity holders said their appeal will be based on the contention that there is significant equity value in the company's estates, and that consummation of the plan would deprive the preferred equity holders of at least tens of millions of dollars of equity value to which they and the minority preferred equity holders are entitled.

The plan was confirmed on May 22. Currently the confirmation hearing is stayed for 10 days, or until June 1.

As previously reported, in his plan confirmation ruling, judge Allan L. Gropper overruled objections brought by the preferred equity holders.

In response to the objections, Gropper said Granite did propose the plan in good faith, and expert valuations and a plan proposal made by the preferred equity holders confirmed that there is no value in the company beyond its debt.

The preferred equity holders had argued that the plan undervalued Granite and paid the secured creditors more than the full amount of their claims, depriving the preferred equity holders of their appropriate recovery.

In an objection to the stay motion filed Thursday, Granite said the preferred equity holders have no chance of success in their appeal.

In addition, Granite said the negative affect a stay of the confirmation order would have on the company "would be staggering."

Granite said it has missed its first-quarter revenue estimates, and it is on pace to miss its second-quarter revenue estimates. As a result, the company said there is a significant risk that the value of its estates will be greatly diminished if it is unable to emerge from bankruptcy soon.

Also, under the terms of the plan of reorganization, if the plan has not taken effect within 20 days of a deadline agreed to by Granite lender Silver Point Finance, the confirmation order will be void and no distributions will be made under the plan.

While Silver Point has indicated a willingness to waive the finality condition if an appeal is pending without a stay, Granite said it is not clear whether Silver Point will extend the deadline or waive the requirement if a stay pending appeal is granted.

Failure to emerge from bankruptcy within 20 days of the plan confirmation order would also prompt an event of default under the company's debtor-in-possession facility, dramatically increasing the amount of interest Granite would have to pay on the DIP facility.

The court was expected to hold a hearing on the stay motion Thursday.

Granite, a New York-based owner and operator of network-affiliated television stations, made a pre-packaged Chapter 11 filing on Dec. 11, 2006. Its Chapter 11 case number is 06-12984.

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