Interep disclosure statement approved contingent on final wording; confirmation hearing set for July 15

By Rebecca Melvin

New York, May 28 - Interep National Radio Sales Inc.'s disclosure statement relating to its proposed plan of reorganization was approved Wednesday by the U.S. Bankruptcy Court for the Southern District of New York, pending a handful of technical adjustments recommended from the bench.

A hearing to confirm the radio, television and internet advertising sales and marketing representative's reorganization plan was set for July 15.

Plan solicitation will begin June 11, with the deadline for filing votes and objections to the plan set for July 10.

Ahead of formally signing an order, judge Robert Drain asked that the enterprise valuation analysis prepared by Jefferies & Co. make clear whether the amount - $77.7 million at the midpoint - included the money-losing internet subsidiaries, which were excluded from the bankruptcy filing March 30 and are expected to be sold.

"Do the debtors believe that there will be any dividend to the parent" relating to the sale of the internet subsidiaries? Drain asked.

Company counsel Erica Ryland of Jones Day said discussions regarding sale of the subsidiaries is ongoing but a material dividend wasn't expected.

Valuation minus $67.7 million pro forma net debt leaves net equity value of $10 million, according to the disclosure statement.

Drain also recommended that Interep include the interest rate amount for the second-lien secured notes that are being offered together with new stock to existing bondholders. The interest rate amount was left blank in the disclosure statement because it was still under negotiation, Drain was told. But he recommended that the level be determined before the document is copied and sent out to stakeholders.

Oaktree Capital Management LP and Silver Point Capital LP hold more than 90% of the $101.5 million of Interep's 10% senior subordinated notes due July 1, 2008.

The notes' looming maturity together with diminished liquidity precipitated the bankruptcy, according to the disclosure statement.

As previously reported, the company entered into a pre-packaged restructuring agreement with its largest bondholders, which allows the company to eliminate all of its existing cash-pay debt.

Under the plan, bondholders will receive second-lien secured notes for $39.7 million - which reflects the mid-point in the enterprise value - that won't pay accrued interest until they mature in 10 years. The noteholders will also receive all of the new stock in the reorganized company, except for 15% reserved in an incentive plan for company executives.

Unsecured creditors with $6.9 million in claims will be paid in full in cash. There is no official unsecured creditors committee in the case.

Drain also suggested further definition of the time period for the continuing right of first offer for the stockholders, and that the plan doesn't provide for the payment of post-petition interest as part of allowed claims.

In its disclosure statement, Interep said the radio advertising industry never fully recovered from a decline in the U.S. economy in 2000 and 2001. Furthermore, since 2005, the company has experienced a significant decline in revenue and margin, traceable to the loss of key client contracts.

It said commission revenue for 2006 decreased $6.2 million, or 7.7%, to $73.9 million from $80.1 million in 2005, reflecting the loss of revenues from the termination of contracts with Cumulus Broadcasting, Inc. and Radio One, Inc. during 2005.

Commission revenue for 2007 decreased an additional $10.9 million, or 15%, to $63.0 million, reflecting the loss of revenues from the termination of contracts with the former Susquehanna Broadcasting stations when they were sold to Comcast and Cumulus Media Partners during 2006.

New York-based Interep filed for bankruptcy on March 30. Its Chapter 11 case number is 08-11079.

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