Equity Media Files For Chapter 11 Reorganization

Equity Media Holding Corp. of Little Rock filed Monday for voluntary Chapter 11 reorganization in the U.S. District Court for the Eastern District of Arkansas.

The broadcaster lists assets of between $100 million and $500 million and liabilities of between $50 million and $100 million, according to documents filed with the court.

Silver Point Finance LLC filed a foreclosure suit against Equity Media Dec. 2, seeking repayment on a $41.5 million credit facility and a court appointed receiver. A bankruptcy filing puts all civil lawsuits on hold until the bankruptcy filing worked out. Equity Media owns 121 television stations in 41 states, and Spanish language-broadcaster Univision Communications Inc. owns an 8 percent stake in Equity Media.

Equity Media lost $52.9 million for the three quarters ending Sept. 30 and $40.8 million for fiscal 2007, which ended Dec. 31, according to documents filed with the Securities & Exchange Commission. The company has a history of losses, according to SEC filings.

"If the Company is unable to obtain additional funds immediately or if the funds cannot be obtained on favorable terms, management may be required to liquidate substantially all available assets, restructure the company, cease all or a part of operations, seek protection under U.S. bankruptcy laws and regulations, or undertake other actions," according to SEC documents.

In the complaint filed by Silver Point, the private equity firm alleges that Equity Media repeatedly defaulted on its credit agreement although Silver Point attempted to restructure the agreement multiple times. The complaint also alleges Equity Media's leadership frequently acted in their own best interest and not in the interest of the lenders.

"Throughout the lending relationship between the Borrowers and Lenders, the Borrowers have repeatedly acted to impair the value of the Collateral and destroy the security of the Lenders and have elevated certain members of the [board of director's] personal interests over the obligations the Borrowers owe to the Lenders," according to the complaint.

The complaint specifically alleges that Equity Media's chairman, Richard Rochon, informed Silver Point that "he would never work with Silver Point to facilitate an orderly bankruptcy of the Borrowers to sell assets." Instead, Rochon said the board members would resign and allow the stations to cease operations, or " 'go dark' and walk away from the company," according to the complaint.

Silver Point learned of the company's intention to file for bankruptcy on Nov. 13, according to the complaint.

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