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Law360 (January 25, 2021, 11:29 AM EST) -- Alpha Media Holdings, which operates more than 200 radio stations in the U.S., filed for Chapter 11 protection Monday with a prearranged plan to overcome COVID-19 "headwinds" and recapitalize $267 million in debt.
In its first-day motions, the Portland, Oregon-based Alpha said it had filed its plan to convert $72.6 million in debt to equity in the face of plunging advertising spending by small and mid-size businesses throughout 2020.
"We believe the balance sheet restructuring will provide greater financial resources and flexibility to Alpha Media, enabling the company to strengthen its position as a leading mid-market broadcaster in the United States, and invest in new digital capabilities to better serve our advertisers and communities," CEO Bob Proffitt said in a statement released Sunday.
In his first-day declaration, Chief Financial Officer John Grossi said Alpha — formed in 2009 — is the largest privately-held broadcast company in the U.S., operating radio stations with a weekly audience of about 11 million in 44 communities as well as offering online "companion" content, including live performances at three venues it owns.
He said the company currently has more than 1,300 full- and part-time employees and independent contractors.
The company is entering Chapter 11 with more than $90 million in first-lien debt, $72.6 million in second-lien debt and $103.9 million in unsecured notes, according to its filings.
Grossi said after a "healthy" performance in 2019 the company's advertising revenues dropped sharply in early 2020 as the COVID-19 pandemic struck the small and mid-sized businesses that comprise the majority of its customers. He said the company instituted wage reductions, furloughs and layoffs, but its financial position had "deteriorated significantly" by April, leading it to begin looking at restructuring.
He said after extensive negotiations with the company's first- and second-lien creditors, an agreement was reached on a plan to convert the second-lien notes to equity. The second-lien creditors have pledged $20 million in debtor-in-possession financing, which will be converted into part of a $37.5 million second lien exit facility, he said.
General unsecured claims will be paid in full in the ordinary course, meaning employees, customers and trade vendors will be "largely unaffected" by the bankruptcy, he said.
In Sunday's statement, Proffitt said Alpha's "core business" remains strong and that the restructuring will leave it "well positioned for a market recovery."
Alpha has retained Moelis & Company LLC and EY Turnaround Management Services LLC as its financial advisers and Ernst & Young LLP as its restructuring adviser.
Alpha is represented by Justin Bernbrock, Bryan Uelk and Colin Davidson of Sheppard Mullin Richter & Hampton LLP and Michael A. Condyles, Peter J. Barrett, Jeremy S. Williams and Brian H. Richardson of Kutak Rock LLP.
The case is In re: Alpha Media Holdings et al., case number 21-30209, in the U.S. Bankruptcy Court for the Eastern District of Virginia.
--Editing by Alyssa Miller.
Update: This story has been updated with comments from Alpha.
Correction: A prior version of the story incorrectly described the plan as prepackaged. The error has been corrected.
For a reprint of this article, please contact reprints@law360.com.
