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Source Interlink's pre-packaged bankruptcy appears to be proceeding just as the media giant intended when it filed late last month for Chapter 11 protection.
The company, whose publishing division includes Surfing, Surfer, Skateboarder and Snowboarder magazines and their associated web sites, won approval Tuesday to pay its vendors and other creditors, using its current accounting systems.Funds for payment come from a $385 million line of credit called
debtor-in-possession financing. The credit essentially allows a group of banks, led by Citibank, to take control of the company from Ron Burkle's Yucaipa Co.s, which held an estimated 34 percent and take it private, Interlink SVP and action sports group publisher Al Crolius earlier told Shop-eat-surf.
A key factor in the pre-packaging was Source Interlink's declaration that it would pay all vendors 100 percent of their claims if they kept current terms intact. The company intends to convert from a publicly traded to private company, shedding $1 billion of the debt it took on when it purchased Primedia for $1.2 billion in 2007. That deal was financed by Citigroup Global Markets, according to news reports at the time.
In a separate filing, the NASDAQ trading board Tuesday said that it is delisting Source Interlink's stock and it will stop trading at the open of markets on May 14.
The company publishes 75 magazines and 90 web sites, including Motor Trend, Hot Rod and Soap Opera Digest. In addition to publishing magazines, Source Interlink is a major distributor of magazines, DVDs, CDs, video games and books.
The company's list of Top 30 creditors includes Bonnier, publisher of the TransWorld titles, which it owed $2,383,784 on April 27, according to court documents.
Some other top creditors listed in court documents:
HSBC Bank, $455 milllion
Time Warner Retail, $75.6 million
Comag Marketing Group, $53.2 million
Curtis Circulation, $42.7 million
Kable Distribution Services, $23 million
Fox Home Entertainment, $11.7 million
Paramount Home Video, $9 million
Sony Pictures Home Entertainment, $5.7 million
Buena Vista Home Entertainment, $4.6 million
EMI Music & Marketing, $4.9 million
UPS, $1.2 million
Playboy Enterprises, $959,723
Source Interlink released this statement, which it attributed to its Chairman and Chief Executive Officer, Greg Mays.
"We continue to be very pleased with the progress made this week in our plan to go private and eliminate a substantial portion of our existing debt. We are also pleased with the response of our trading partners, all of which have enthusiastically supported our plan. Our restructuring is progressing better than expected.
"We are on schedule to emerge shortly with significantly less debt, materially reduced interest expense and substantially improved free cash flow allowing us to capitalize on several operational opportunities to further improve and grow our business. Our restructuring also will permit our employees to continue to do what they do best - provide exceptional service to our customers."