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Granite Files for Chapter 11 Protection

Dec 11, 2006  •  Post A Comment

Granite Broadcasting on Monday filed for protection under Chapter 11 in the U.S. Bankruptcy Court for the Southern District of New York.

The filing included a plan of reorganization that has been pre-negotiated with the company’s secured debt holders and that includes going private with debtholders exchanging their existing notes for a combination of new notes and new common stock, and the current common and preferred stockholders exchanging their existing stock for shares of the reorganized company.

W. Don Cornwell, chairman and CEO of Granite, said in a press release announcing the action that “we have been candid about the company’s need to restructure its corporate balance sheet. Together with our financial advisor, Houlihan Lokey Howard & Zukin, we evaluated and exhausted a number of strategic options. However, we were unable to find an alternative long-term solution that would have permanently addressed our capital structure.”

The group, which owns, operates or provides services to 23 stations in 11 markets, has operated at a loss for the past three years and has twice borrowed money this year to meet late interest payments on hundreds of millions of dollars of debt.

Mr. Cornwell said Granite’s Chapter 11 filing has the support of its secured debtholders, who had worked on the plan, which is expected to reduce the station group’s corporate debt by more than $275 million to about $230 million.

When it reported on third quarter 2006, Granite said it did not have enough cash to make the Dec. 1 interest payment of $19.74 million on its notes and to repay all amounts outstanding under its $70 million credit agreement, also due Dec. 1. As of September, Granite said, it had unrestricted cash and accumulated deficit of $18.23 million and $513.9 million, respectively.

Granite said at the time that it was reviewing all reorganization alternatives, including bankruptcy protection.

Silver Point Finance is listed as the administrative agent of the most recent credit agreement with Granite.

Mr. Cornwell said the restructuring process is expected to be completed by the first half of 2007.