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Marshall Broadcasting Group, Inc. – Prepetition Lenders Declared Successful Bidder with $49mn Credit Bid as Byron Allen’s Stalking Horse Stumbles at Late Hurdle

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March 27, 2020 – Further to a February 14th bidding procedures order [Docket No. 157], and the Debtor's subsequent notice that the bid of stalking horse Allen Media Broadcasting Evansville, Inc. (“AMBE”, $55.0mn cash bid) had been found noncompliant with the terms of that order [Docket No. 194], the Debtor has designated credit-bidding Mission Broadcasting, Inc. (“Mission”) as the successful bidder ($49.01mn bid) in respect of substantially all of the Debtor's assets [Docket No. 198]. Mission is an entity created by holders of the Debtor's prepetition bank debt and the Mission APA is attached to the sale order as Exhibit A.

The Debtors have yet to file documents that detail why the bid of AMBE, founded by entertainer-turned-media mogul Byron Allen, fell apart; but something happened between March 13th, when AMBE filed schedules to their APA [Docket No. 180] and March 21st when the AMBE bid was determined noncompliant. Another strange twist in respect of the Debtor, founded in 2014 by Pluria Marshall, Jr., which has spent much of its stay in bankruptcy fixated with allegations that Nexstar MediaGroup Inc. ("Nexstar") had driven it into bankruptcy "so that it could obtain MBG’s stations for pennies on the dollar." Nexstar and the Debtor continue to be engaged in litgation relating to shared services and joint services agreements and Nexstar continues to raise obkections to the debtor's bankruptcy process, the most recent a March 27th objection related to proposed cure amounts [Docket No. 200].

A sale hearing is scheduled for March 30th.

Background

The Debtor's bidding procedures motion [Docket No. 113] stated, “The Debtor owns and operates three television stations: KMSS-TV, Shreveport, Louisiana, KPEJ-TV, Odessa, Texas and KLJB, Davenport, Iowa (the ‘MBG Stations’). The Debtor is a small minority-owned company that provides programming through its affiliation agreements with FOX Broadcasting Corporation in all markets. As contemplated by the APA, the Proposed Sale of the Assets is subject to a competitive Auction process that will help to ensure maximum value for the Assets will be realized for the Debtor’s estate and its creditors."

The Debtors’ lead petition noted a single unsecured claim in excess of $25k; that of Nexstar MediaGroup Inc. ("Nexstar") which relates to $15.3mn of "SSA and JSA fees [shared services and joint services agreements fees]" and is listed as both disputed and subject to setoff. Nexstar and the Debtor remain embroiled in litigation commenced by the Debtor in April 2019, see "The Bait and Switch" below. 

In July 2019, the Debtor further raised the stakes with a highly publicized call on the FCC to investigate Nexstar. The Debtor's owner, Pluria Marshall, stated: "We allege this reckless disregard for the FCC's rules of engagement has, essentially, defrauded federal regulators and consistently hampered our ability to thrive in the markets we adopted as part of the FCC agreement. We didn't think the FCC's Enforcement Bureau would look too kindly on that, which is why we're calling for a federal investigation into the matter.

The Bait and Switch

In a press release entitled "The Bait and Switch," the Debtor outlines the nature of a case it filed against Nexstar in April 2019 which alleges that Nexstar has attempted to manipulate the FCC's stated goals of increasing ethnic diversity in broadcasting by promoting and then sabotaging the Debtor's business efforts.

The press release states: "The Federal Communications Commission ('FCC') has an admirable and often-stated goal of increasing ethnic diversity in ownership of broadcast stations and ensuring that a broad diversity of voices and viewpoints are delivered on the public airwaves. Nexstar pretended to support this objective by partnering with Marshall Broadcasting Group ('MBG') to obtain FCC approval for a transaction, but as soon as the deal was done, it purposefully worked to undermine MBG. This 'bait and switch' flies in the face of the FCC’s quest for diversity in ownership and programming and is a dangerous precedent that could affect ALL minority-owned businesses in the telecommunications space.  

From day one, Nexstar set out to use MBG’s minority-ownership status to obtain FCC approval of a larger transaction and then drive MBG out of business so that it could obtain MBG’s stations for pennies on the dollar."

About the Debtor

The Debtor describes itself as follows: “Marshall Broadcasting Group, Inc. is a minority owned television broadcasting company that owns three full power television stations in the United States. The company was founded in 2014 by Pluria Marshall, Jr. All three of its television stations are affiliated with Fox and are operated through shared services agreements by the Nexstar Media Group.

In 2014, Nexstar Broadcasting Group acquired the stock of television operators Grant Broadcasting, Communications Corporation of America, and White Knight Broadcasting. Due to FCC ownership limits, Nexstar sold former Grant station KLJB in Davenport, Iowa, and former ComCorp stations KPEJ-TV in Odessa, Texas and KMSS-TV in Shreveport, Louisiana, all three of which are Fox affiliates, to Marshall Broadcasting. Nexstar has a shared services agreement with Marshall Broadcasting providing master control, news, promotions, and engineering support.”

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The post Marshall Broadcasting Group, Inc. – Prepetition Lenders Declared Successful Bidder with $49mn Credit Bid as Byron Allen’s Stalking Horse Stumbles at Late Hurdle appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.


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