As I reported 1 month ago, Source Interlink (75 publications and related websites including including motorcycle magazines Hot Bike, Street Chopper, Baggers, Motorcycle Cruiser, Motorcyclist, etc) filed for chapter 11-bankruptcy protection and at the same time submitted to the court a “pre-pack” reorganization plan. A “pre-pack” is a court proceeding in which the creditors will be paid in full or have agreed to take less. It is used to implement a restructuring of a company’s capital without disturbing its daily operations. The objective is to reduce interest expense, significantly improve free cash flow and allow a company to capitalize on several operational opportunities to further improve and grow its business. After obtaining from its lenders cancellation of nearly $1 billion of the company’s existing debt, and getting $100 million of new financing, the court accepted the proposed restructuring plan. Yesterday Greg Mays sent this letter to announce the good news to all employees.
“Dear Valued Employee, I am pleased to announce that Source Interlink Companies Plan of Reorganization was approved yesterday. This official confirmation clears the way for the Company to emerge from the reorganization proceedings as planned in early June. The reorganization process lasted an unprecedented 31 days! With your continued help and support, Source was able to continue operations in the ordinary course, and pay all vendors in full and on time.
Over the next few days Source will finalize the legal process and will emerge as a privately held company. As promised the lenders have cancelled nearly $1 billion of the company’s existing debt and have provided us with approximately $100 million in additional liquidity to the company. The restructuring materially reduces our interest expense and debt levels, and substantially improves our free cash flow allowing us to capitalize on several operational opportunities to further improve and grow our business. As referenced before, the current management will remain in place and the new company will select a regular board of directors after we finalize the legal process.
Again, I appreciate the positive attitudes, hard work and continued support that each of you have demonstrated during this period. Due to the restructuring, your efforts and good managing we can now look forward to a more prosperous future. If you have questions or would like additional information please go to Source Interlink or contact Cindy Beauchamp, at (239) 949-7624” Greg Mays.