And as we mentioned last week, we are hearing the word “bankruptcy” more than we ever have in the past. Two weeks after choosing to default on a $23.6 million interest payment on 7.75% senior notes due 2019, Cumulus has disclosed a previously confidential term sheet that includes pre-packaged Chapter 11 details.
Cumulus has been in negotiations with lenders about restructuring its massive debt load. The company states the term sheet is being provided “as part of a proposed comprehensive restructuring transaction.” The company is also hopeful an out-of-court agreement can be made with lenders.
Under the plan, senior lenders, who are owed $1.72 billion, will receive $350 million plus cash on the company’s balance sheet to pay down part of the loan. The remaining amount will be reinstated. 98% of the bondholders would need to agree to the restructuring plan to complete the restructuring outside of bankruptcy court.
4 key points from the proposed restructure:
– Bondholders will invest $350 million, the proceeds of which will be used to pay down the Term Loan.
– 100% of the $610 million of outstanding bonds will be converted into the common equity of Cumulus.
– The Term Loan interest rate will be increased to LIBOR + 6.0%.
– The company will use excess cash, as of the effective date of the restructuring, to pay down the Term Loan.
Negotiations are ongoing with creditors, however there is no indication that this proposal will be accepted or rejected. Cumulus has until December 1 to pay the $23.6 million interest payment it skipped out on or face the possibility going into an Event of Default. An Event of Default means lenders can demand full repayment of the entire loan sooner than it was originally due.
The most recent SEC filing (READ IT HERE) says the company will be restructured through either an out-of-court restructuring consistent with the terms and conditions described in the term sheet, or a voluntary pre-packaged Chapter 11 Bankruptcy.