Troubled Classic Communications Inc. filed for Chapter 11 protection from
creditors in U.S. Bankruptcy Court for the District of Delaware Tuesday.
The company, which has defaulted several times on high-yield bonds, said that
in connection with the bankruptcy filing, it has secured a revolving credit
facility for up to $30 million in debtor-in-possession financing from Goldman,
Sachs Credit Partners L.P., which will be used to fund operations during the
reorganization process.
The bankruptcy court must also approve that financing.
Classic has had trouble competing against direct-broadcast satellite
companies and absorbing the high cost of upgrading systems.
As a result, the company's stock, which had traded as high as $39 per share
two years ago, has been languishing in the 14-cents-per-share range -- where it
closed Tuesday -- for months.
'The reorganization is necessary to rectify operational and liquidity
difficulties resulting from increased competition and the service of high-cost
debt,' Classic president Dale Bennett said in a prepared statement.
'The company plans to emerge quickly from bankruptcy with a strong regional
presence in its core markets of operation,' he added. 'After weighing all of the
options, we believe this broad restructuring is the best and most reliable way
to position Classic for future stability, growth and success.'
Classic has about 346,000 subscribers, mostly in rural and secondary markets
in Texas, Kansas, Oklahoma, Nebraska, Missouri, Arkansas, Louisiana, Colorado,
Ohio and New Mexico.
Classic said it sold its system in Breckenridge, Colo., to TCI Cable Partners
of St. Louis L.P. last month for about $13.7 million. The company will receive
an additional $2.5 million for the sale if certain conditions are met. The
company added that it used the proceeds of the sale to pay interest due on its
debt.
It has been rumored that a group of 'vulture' investors, including Romulus
Holdings Inc. and Cerberus Partners LP, has been buying up Classic debt with the
intention of swapping those bonds for equity in the company.
Romulus had taken a similar action with another rural cable company, Galaxy
Telecom L.P., in October.
