Granite Broadcasting files pre-packaged plan, seeks court approval of $25 million DIP

By Caroline Salls

Pittsburgh, Dec. 12 - Granite Broadcasting Corp. filed its pre-packaged plan of reorganization and related disclosure statement Monday with the U.S. Bankruptcy Court for the Southern District of New York and requested court approval of up to $25 million in debtor-in-possession financing.

The company made its pre-packaged Chapter 11 filing on Monday.

As previously reported, the proposed plan of reorganization will reduce the company's corporate debt by more than $275 million to roughly $230 million.

Granite said it expects to emerge as a privately held company.

Under the plan, current secured debtholders will exchange their existing notes for a combination of new notes and new common stock.

Current common and preferred stockholders will exchange their existing stock for shares of the newly reorganized company.

The company will issue 15 million shares of new common stock, with 11 million to be issued under the plan.

Granite will also issue five-year series A warrants to purchase 750,000 shares of new common stock at an exercise price of $32.37 per share, which represents 125% of the implied equity value, and five-year series B warrants to purchase 250,000 shares of new common stock at an exercise price of $36.26, which represents 140% of the implied equity value.

In addition, each eligible investor will have the opportunity to participate in a rights offering entitling the holder to subscribe for its portion of the rights of up to 1 million shares of the new common stock.

If the eligible investors do not fully subscribe to the rights offering, holders of the company's class B interests will have the opportunity to participate in the rights offering with a total subscription price of no more than $7.5 million.

To the extent the class B interest holders do not fully exercise the remaining rights, the rights will revert to the holders of secured claims and will be extinguished.

Treatment of creditors under the plan will include:

• Holders of debtor-in-possession claims will recover 100% in cash;

• Holders of $496.17 million in secured claims will recover 90.9% through a share of the secured term loan exit facility, 10 million shares of new common stock and rights to purchase more, and series A and series B warrants. Any rights that revert to secured claimants will be extinguished;

• Holders of between $3.07 million and $26.04 million in Granite general unsecured claims will recover between 19.2% and 100% through a share of $5 million in cash, provided that if these creditors vote to accept the plan, then holders of deficiency claims against Granite will receive no distribution of property and provided further that if general unsecured creditors vote to reject the plan, then deficiency claimants will receive the same distribution as general unsecured claimants;

• Holders of $47,426 in Granite convenience claims, $19,013 in KBWB convenience claims and $15,798 in WXON convenience claims will recover 100% in cash;

• Holders of $29.28 million in Malara guaranty claims, $28.67 million in KBWB general unsecured claims and $3.7 million in WXON general unsecured claims will receive no distribution under the plan;

• Holders of preferred interests will have their interests extinguished and will receive their share of 200,000 shares of new common stock and the right to purchase up to 500,000 shares of new common stock under series A warrants. In addition, some preferred stockholders who are accredited investors will receive the right to purchase up to 1 million shares of new common stock at the implied equity value; and

• Holders of class A interests and class B interests will have their interests extinguished and will receive a share of 100,000 shares of new common stock, the right to purchase up to 250,000 shares of new common stock under the series A warrants and the right to purchase up to $250,000 of new common stock under the series B warrants.

Exit financing and DIP terms

The company said it expects to obtain an exit facility consisting of a 51/2-year $200 million exit secured term loan and a five-year exit secured revolving credit facility in an amount equal to the amount needed to satisfy any outstanding balance under the DIP, plus $25 million, up to a cap of $50 million.

The proceeds of the revolver, together with those from the rights offering and cash generated from operations, will be used to repay any DIP balance, to fund plan payments and to meet working capital and other corporate needs.

The DIP facility will be used for ongoing working capital, to pay fees and expenses of professionals, DIP lenders and agents and for general corporate purposes.

Interest will be Libor plus 275 basis points.

The DIP will expire on the earlier of 45 days after the interim order was entered if a final order has not been entered, Sept. 1, 2007, the effective date of a plan of reorganization or upon acceleration of the loan.

Granite will pay a commitment fee of 1.25% on the first $15 million of the commitment and 0.625% on the rest of the commitment and a $75,000 agency fee.

The company is requesting interim access to $5 million of the DIP.

Granite is a New York-based owner and operator of network-affiliated television stations. Its Chapter 11 case number is 06-12984.

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