On Wednesday, the official committee of unsecured creditors objected to Cumulus’ plan to reorganize. That was followed by an objection by an ad hoc cross-holder committee. Cumulus quickly followed up with a statement that said the objections were normal and will not impact the company’s restructuring timeline.
The ad hoc cross-holder committee objected to Cumulus’ reorganization plan for two reasons. They say Cumulus “has grossly underestimated their value in an attempt to deliver a controlling equity share to their preferred new owners, the term-loan lenders. And the plan would distribute the 16.5% of the equity they are leaving for unsecured creditors (which they claim to be a “gift” to which the unsecured creditors are not entitled) in a way that fundamentally violates the bankruptcy code’s distribution scheme.” The committee says the plan cannot be confirmed without resolving these two “fatal flaws.” The ad hoc committee says Cumulus is valuing the company at $1.5 to $1.7 billion and the actual value of the company is more in the range of $2.1 to $2.4 billion.
The UCC objection was sealed.
Here is the full statement from Cumulus about the objections: “Today’s objections to our Plan of Reorganization by the UCC and the Cross Holders were anticipated — they are normal parts of the restructuring process and will not impact our restructuring timeline. We look forward to emerging from the restructuring process with a stronger foundation and to continuing to execute our turnaround plan which remains on track both operationally and financially. Both objections largely reiterate statements that have already been made through the restructuring, which we believe have no merit, and we remain confident that we will successfully address these claims through the Court process.”
Cumulus hopes to emerge from this bankruptcy proceeding, in late spring, a stronger company with a much cleaner balance sheet. If this bankruptcy plan is approved by the court, Cumulus’ debt will be reduced by about $1 billion. In exchange, Term Loan Lenders will receive 83.5% equity in the company. Unsecured creditors will received 16.5% equity.
