Alpha Media, LLC: Lenders In Conflict

Just hours after we wrote about Alpha Media LLC’s Chapter 11 filing, we’ve uncovered further details about what’s happening at this radio chain. According to several trade and financial articles we’ve read, management are working with second-lien lenders to provide Debtor In Possession (“DIP”) capital. In fact, the company already signed a $20 million Senior Secured Priming Superpriority Debtor-In-Possession Note Purchase Agreement.

The fly in the ointment – and what we were not aware of when writing our earlier article – is that there is a dispute about the future of the business – and its $267mn in debt – between first lien and second lien lenders. The group funding the DIP is from the second lien side, led by Intermediate Capital Group, said to hold over $100mn of pre-petition debt. The new buyers are offering to advance $37.5mn in expansion capital, which has the understandable support of the radio chain’s management. Here’s the actual bankruptcy filing with all the details.

The fly in the ointment is that – according to financial news reports – the senior lenders to Alpha Media, led by Fortress Investment Group, oppose the restructuring plan. Apparently Fortress made the company an offer it could refuse earlier and has chosen to go with the second lien lenders and their proposal of less debt and additional capital instead. More we cannot tell you at this stage but this might mean this Chapter 11 could get contentious. That can sometimes extract more capital for the company involved but can also exhaust already stretched financial resources and prolong the period of insecurity which a Chapter 11 filing involves.

Where the only BDC lender with exposure – WhiteHorse Finance (WHF) – sits in all this – with $11.2mn of exposure – we can’t say for certainty. WHF’s filings show the BDC holds a “first lien secured term loan“. That would suggest the BDC would line up with Fortress, but we don’t know. Probably WHF – due to its small position (which dates back to 2018 ) – has only little say in this situation. Just how this all plays out for WHF – and all the parties involved – remains a question mark that will get its answer in the weeks ahead. We’ll circle back as appropriate.