Otelco's disclosure statement approved, pre-packaged plan confirmed

By Jim Witters

Wilmington, Del., May 6 - Otelco Inc. received approval for its disclosure statement and confirmation of its Chapter 11 plan of reorganization during a May 6 hearing in the U.S. Bankruptcy Court for the District of Delaware.

The plan confirmation came just 43 days after the bankruptcy petition was filed, debtors attorney Jennifer Hardy said.

The plan will strengthen the company by deleveraging its balance sheet and reducing its overall debt to about $142 million from about $270 million, she said.

The plan was accepted by 100% of Otelco's senior lenders and voting holders of more than 96% in dollar amount of its senior subordinated notes.

As previously reported, Otelco reached an agreement earlier this year with its senior lenders to amend and extend the terms of its current senior financing through April 2016.

In addition, the company's income deposit securities (IDS) units will be canceled, and the existing senior subordinated debt will be converted into equity.

Plan terms

The terms of the pre-packaged plan include the following:

• Holders of senior secured term loan claims receive a share of up to $142 million in new term loan obligations maturing on April 30, 2016, a payment of at least $20 million from all available cash in excess of $5 million after plan payments have been made and an amendment fee of 7.5% of new class B common stock;

• Specified revolving loan commitments will be reinstated, with availability of up to $5 million;

• Outstanding notes, including the outstanding notes constituting part of Otelco's IDSs, will be canceled, and the holders of outstanding notes will receive their share of Otelco's new class A common stock, representing 92.5% of the total economic and voting interests in Otelco;

• General unsecured claims will be reinstated in full; and

• The outstanding shares of Otelco's existing common stock, all of which currently constitute part of the IDSs, will be canceled.

Otelco, an Oneonta, Ala.-based traditional wireline telephone services provider, filed for bankruptcy on Feb. 1. The Chapter 11 case number is 13-10593.

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