Muzak files reorganization plan with support of unsecured creditors

By Caroline Salls

Pittsburgh, Sept. 10 - Muzak Holdings LLC filed a plan of reorganization and related disclosure statement with the U.S. Bankruptcy Court for the District of Delaware that is supported by an overwhelming majority of the company's unsecured creditors, according to a company news release.

Specifically, Muzak said the plan is supported by its largest secured and unsecured creditor Silver Point Capital Advisors LP, its official committee of unsecured creditors and an informal committee of senior unsecured noteholders.

Under the plan, the company's outstanding debt would be reduced by more than half to $230 million, and its annual interest expense would be significantly reduced.

"The filing of our plan represents a significant milestone and an important next step in our effort to restructure Muzak's balance sheet," chief executive officer Stephen P. Villa said in the release.

"Although there is still much work to be done, we have worked diligently over the last several months to address our capital structure and we are confident that, upon confirmation of our plan and emergence from Chapter 11, Muzak will be well-positioned for long-term success."

Creditor treatment

Treatment of creditors will include:

• Holders of secured bank debt claims will either receive payment in full in cash with the proceeds of an exit facility or their share of a new term loan. However, in the absence of exit financing, and to the extent secured bank debt holders vote to accept the plan, holders of these claims other than Silver Point will receive their share of $20 million in cash, as well as new term loans;

• Holders of the $220 million 10% senior unsecured notes will receive $135 million in new senior unsecured notes with 8% cash and 7% PIK coupons, as well as $85 million of payment-in-kind preferred stock;

• Holders of the $115 million 9 7/8% senior subordinated unsecured notes will receive 100% of the new common stock of reorganized Muzak;

• Holders of the $24 million 13% senior discount unsecured notes will receive five-year warrants for 7.5% of the fully-diluted new common stock at market value based on an enterprise value to be determined;

• Holders of general unsecured claims and priority claims will recover 100% in cash;

• Existing equity interests will be cancelled; and

• Intercompany interests will either be retained or cancelled.

The disclosure statement approval hearing is scheduled for Oct. 27.

Muzak, a Fort Mill, S.C.-based recorded music company, filed for bankruptcy on Feb. 10, 2009. Its Chapter 11 case number is 09-10422.

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