Heartland Publications first-lien lenders agree to support plan

By Caroline Salls

Pittsburgh, Feb. 23 - Heartland Publications, LLC said the requisite number of first-lien lenders have agreed to support its amended plan of reorganization, according to a company news release.

"We are pleased that the agreement with our lenders significantly streamlines the Chapter 11 process and keeps the company on track to complete the reorganization in early April," president and chief executive officer Michael C. Bush said in the release.

The company said it hopes that the amended plan materials, which were filed on Tuesday with the U.S. Bankruptcy Court for the District of Delaware, will also be acceptable to its second-lien lenders.

The amended plan eliminates a provision that called for an asset marketing and sale process in connection with the plan.

However, according to the amended disclosure statement, the company does have a right under the plan support agreement to conduct a marketing process to the extent it deems necessary.

In addition, Heartland said Goldman Sachs has withdrawn its previous objections to the disclosure statement related to the plan, and no other disclosure statement objections have been filed.

Under the plan, $70 million of existing first-lien debt would be exchanged into two term loans of $60 million and $10 million, respectively.

In addition, the first-lien lenders would be entitled to 90% of the equity in the reorganized company.

Heartland said the plan also calls for full satisfaction of general unsecured claims.

Creditor treatment

Creditor treatment will include:

• Holders of administrative claims, priority tax claims and priority non-tax claims will be paid in full in cash;

• Holders of other secured claims will recover 100% either in cash or the return of the collateral securing the claim;

• Holders of first-lien claims will receive the senior term loans and class A/B common units. These creditors can also elect to receive their class A/B common units in the form of class B limited voting common units;

• Holders of second-lien claims will receive class D limited voting common units if they vote to accept the plan. If these creditors reject the plan, they will receive no distribution;

• Holders of general unsecured claims will be paid in full in cash, provided, however, that if holders of second-lien claims vote to reject the plan and the court determines in response to an objection filed by a holder of a second-lien claim that leaving the general unsecured creditors unimpaired violates the Bankruptcy Code, then holders of general unsecured claims will receive no distribution and will be deemed to have voted to reject the plan; and

• Interest holders will receive no distribution, provided, however, that if the second-lien creditors vote to accept the plan, interest holders will receive a share of warrants.

The disclosure statement hearing is scheduled for Friday.

Heartland, a Clinton, Conn.-based newspaper operator, filed for bankruptcy on Dec. 21. Its Chapter 11 case number is 09-14459.

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