With two buyout firms doubling down on their investments, Penton Business Media Holdings Inc. filed for a prepackaged Chapter 11 bankruptcy reorganization in an effort to eliminate $270 million in debt and position itself for a digital future.
In its Feb. 10 court filing, the New York company, publisher of such titles as National Hog Farmer and Microwaves & RF, said it expects to be able to pay its senior lenders and trade creditors in full, but junior debt holders are likely to recover only 15 percent of their investments, and secondary lenders, including the company’s equity investors, sponsors
Representatives of the two New York buyout firms would not provide executives to discuss the plan, but Warren Bimblick, Penton’s senior vice president of strategy and business development, said the company, which depends on advertising for 60 percent of its revenue, has been hit hard by the economic slump and the shift away from print toward electronic media. As a result, its revenues and EBITDA have fallen below the provisions of its debt covenants.
The equity holders plan to invest as much as $51.2 million in the reorganization to provide Penton with additional working capital, and lenders agreed to extend the senior debt term for 18 months, to August 2014, court documents said. It is uncommon for buyout firms to increase their investment in a company in bankruptcy (the more common strategy is to walk away). But in this case, the court filing was a way to get the attention of a large and diverse group of investors that share stakes in the junior debt, Bimblick said. “The owners believe in the strategy of the company and want to invest in ways to make it grow.”
Penton took its current form in February 2007, when MidOcean Partners bought a 50 percent stake in Prism Business Media for $550 million from Wasserstein Partners,
Roland A. DeSilva, a co-founder and managing partner of the media investment banking firm DeSilva+Phillips, said the buyout firms already had made a major commitment to convert Penton to a digital information company, and the Chapter 11 filing provided an efficient way to adjust to changed economic circumstances.
“They’re doubling down, in effect, on this. They believe in the company and they believe in the management,” said DeSilva, who was not involved in the workout. “Sooner or later, in the next three years or so, it will become that company, transfer everything to the digital realm, and the profits will be much higher.”
Wasserstein’s investment in Penton came out of