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Cumulus Bankruptcy Objections Filed

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Cumulus Media’s official committee of unsecured creditors and the ad hoc cross-holder committee filed with the U.S. Bankruptcy Court separate objections to the Company’s First Amended Joint Plan of Reorganization.

The ad hoc cross-holder committee asserts, “The Debtors’ proposed Plan cannot be confirmed for at least two reasons. First, the Debtors have grossly underestimated their value in an attempt to deliver a controlling equity share to their preferred new owners, the Term Loan Lenders. Second, the Plan would distribute the 16.5% of the equity they are leaving for unsecured creditors (which they claim to be a ‘gift’ to which the unsecured creditors are not entitled) in a way that fundamentally violates the Bankruptcy Code’s distribution scheme. The Plan cannot be confirmed without resolving these two fatal flaws.”

In addition, “The failure of their valuation means that the Debtors’ prepetition Term Loan Lenders – who will own 83.5% of the equity in the reorganized Company under the terms of the Plan – will end up with consideration that greatly exceeds the full face value of their claims, while unsecured creditors recover on only a fraction of their claims. That the Plan effectively provides for the Term Loan Lenders to receive a distribution in excess of a 100% recovery, while unsecured creditors receive between 6.7% and 13.7%, is in blatant contravention of the ‘fair and equitable’ requirement under section 1129(b) of the Bankruptcy Code. The Plan therefore is not confirmable in its current form….Second, in violation of black letter law in this Circuit, the Debtors’ proposed Plan does not respect the differing legal rights amongst the various classes of unsecured creditors. The Plan provides for identical distributions to both holders of Senior Notes Claims on the one hand, and holders of General Unsecured Claims on the other, despite the fact that the former have claims against 36 of the 37 Debtors while the latter typically have claims only against a single Debtor.”

Read more Cumulus bankruptcy news.

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