Indianapolis Downs is seeking an additional extension of the exclusive period during which only the company can file a reorganization plan, this time through March 19, in order to give two key stakeholders more time to agree on a process for moving the case forward.
The company is also seeking to extend the exclusive period to solicit votes to the reorganization plan, through May 7.
According to a supplemental motion to extend exclusivity filed on Feb. 22 with the bankruptcy court in Wilmington, Del., the company said it and the two stakeholders – Fortress Credit Opportunities Advisors, which holds a blocking position in the company’s second-lien notes and 90% of the company’s third-lien notes, and an ad hoc committee of second-lien noteholders – “are close to reaching a consensus on the appropriate path forward.”
According to the filing, that path would comprise a “parallel process” that would require the company to engage, first, in a Section 363 sale process and, if that turned out unsuccessful, would be followed by a consensual reorganization plan supported by Fortress and the ad hoc panel.
As reported, Indianapolis Downs and Fortress previously came up with a reorganization plan that would convert third-lien notes to 100% of the equity in the reorganized company and provide the second-lien notes with a combination of cash from a new roughly $300 million first-lien exit facility and new securities in the principal amount of $260 million. The company said it believed the plan would pay second-lien noteholders in full.
But the ad hoc committee of second-lien holders said it would oppose the plan on a variety of grounds, guaranteeing a contested confirmation hearing. Instead, the committee proposed a sale process in which it said it was willing to provide a credit bid to serve as a stalking-horse credit bid. Indianapolis Downs, however, said there were “significant legal impediments” to a credit bid because of Fortress’s second-lien blocking position.
As also reported, the company’s exclusive period to file a plan was scheduled to expire on Jan. 31, but at the end of January the company filed a motion seeking a short exclusivity extension, through Feb. 14, to give Fortress and the ad hoc committee time to negotiate a consensual process for moving the case ahead. The company said, however, that it has “taken longer than expected to complete a promised term sheet reflecting their view of the process,” adding that the additional time now being sought afforded by the extra exclusivity would allow the company to “continue to facilitate these discussions and to allow additional time for the creditor constituencies to negotiate and provide a term sheet.”
Before a hearing could be held on the short exclusivity extension, however, the company extended the hearing date to Feb. 27, effectively extending exclusivity to that date as well, because under the Delaware court’s rules exclusivity is automatically extended to the hearing date. According to the supplemental motion, the hearing on exclusivity remains on track for Feb. 27.
Meanwhile, the company said that Fortress and the ad hoc committee have been negotiating both with the company and with one another independently, and “are working diligently to resolve open issues.” The company said that Fortress and the committee were “close to reaching a consensus,” adding that once a term sheet is agreed upon, the company will evaluate the proposed final process, obtain board approval and prepare needed documentation.
In the supplemental motion, the company explained the unique dynamic that has stood in the way of a consensus in the case. “While both the ad hoc second-lien committee and Fortress have been very constructive in their discussions with the debtors,” the company said, “it has been clear from the beginning of these Chapter 11 cases that the ad hoc second-lien committee and Fortress … have different views of both value and an appropriate split of that value between them. This dynamic is made more difficult by the fact that Fortress holds a blocking position in the second-lien notes and, therefore, the ad hoc second-lien committee does not speak for sufficient holders of second-lien notes to carry the class under a plan of reorganization.”
With respect to a potential Section 363 asset sale, the company had previously said it had received expressions of interest from three potential buyers. In the supplemental motion, the company described each as a “credible buyer,” but added that the offers were at “a preliminary stage and there are issues with each expression of interest.”
Further, as the company has previously said, there remain “other parties that might also be interested in acquiring the Debtors’ assets through a process.”
Meanwhile, if the company is required to turn to a traditional reorganization plan, it said that as of Oct. 26, 2011, it had received indications of interest from six providers interested in providing exit financing to the company. – Alan Zimmerman