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Marshall Broadcasting Group, Inc. – With Sale and Nexstar Settlement Accomplished, Files Combined Chapter 11 Plan and Disclosure Statement; Founder Exploring E-Sports Business Model

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December 31, 2020 – The Debtor filed a combined Plan and Disclosure Statement [Docket No. 408]; and further requested a Court order (i) scheduling a combined hearing for February 19, 2021 and (ii) approving the adequacy of the Disclosure Statement on an conditional basis [Docket No. 409].

The Combined Document proposes to satisfy all four creditor/interest holder classes in full and, as such, deems them all as having accepted the Plan without need for solicitation of votes. This appears to be the one aspect of the Debtor's case that has gone smoothly, as an asset sale process that saw rejection of the initial Stalking Horse Bid by the Debtor and litigation with Nexstar MediaGroup Inc. complicated the early stages of the proceedings. (See more on asset sale and Nexstar dispute and settlement below).

After the Plan takes effect, the Debtor intends to further explore a business model tied to E-sports, which the Combined Document classifies as "currently in the concept phase and creation at this time."

The Combined Document [Docket No. 408] states, "MBG is a Texas corporation that, prior to the closing of the Sale, owned and operated three television stations: KPEJ in Odessa, Texas; KMSS in Shreveport, Louisiana; and KLJB in Davenport, Iowa. MBG was formed by its owner and sole shareholder, Pluria Marshall Jr. ('Mr. Marshall'), for the purpose of acquiring the Stations from Nexstar. The Stations were purchased from Nexstar for approximately $43.3 million. MBG is a small, minority-owned company that provided programming through its affiliation agreements with FOX Broadcasting Corporation in all markets. Between 2014, when the Stations were acquired, and the Petition Date, MBG operated the Stations, including producing local news content and selling advertising. As of the Petition Date, MBG had 22 full-time employees, comprised of sales and technical personnel, across all markets.

In connection with his operation of the Stations, Mr. Marshall has been exploring the future of broadcast through digital distribution (streaming). In addition, Mr. Marshall has gained experience and a level of expertise in alternative forms of gaming models, including such things as E-sports, where multi-sport competitions are carried out through a digital platform akin to a video game. This form of sports and entertainment has gained a heightened level of demand during the current COVID-19 pandemic. Following the Effective Date, the Reorganized Debtor intends to capitalize on the foregoing through digital content creation, distribution and event creation. The business model is currently in the concept phase and creation and, at this time, it is impractical to provide definitive milestones to be achieved. The Reorganized Debtor’s intent, after satisfying all Allowed Claims in full, is to pursue further exploration and development of the foregoing model." 

The following is a summary of classes, claims, voting rights and expected recoveries (defined terms are as defined in the Plan and/or Disclosure Statement):

  • Class 1 (“Other Secured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan.
  • Class 2 (“Other Priority Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan.
  • Class 3 (“General Unsecured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan.
  • Class 4 (“Equity Interests”) is unimpaired, deemed to accept and not entitled to vote on the Plan.

Proposed Key Dates:

  • Conditional Disclosure Statement Hearing: Week of January 11, 2021
  • Plan/Disclosure Statement Objection Deadline: February 12, 2021
  • Combined Hearing: February 19, 2021

Asset Sale

On December 3, 2019, Marshall Broadcasting Group, Inc. (“MBG” or the “Debtor”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the Southern District of Texas, lead case number 19-36743. At filing, the Debtors’ lead petition noted estimated assets between $50.0mn and $100.0mn; and estimated liabilities between $50.0mn and $100.0mn.

On April 1, 2020, the Court hearing the Marshall Broadcasting Group case approved the sale of substantially all of the Debtor’s assets to Mission Broadcasting, Inc. (“Mission or Buyer,” $49.01mn credit bid) [Docket No. 227]. 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.

Mission was declared the successful bidder on March 27th, after the Debtor notified the Court that the bid of stalking horse Allen Media Broadcasting Evansville, Inc., founded by entertainer-turned-media mogul Byron Allen (“AMBE”, $55.0mn cash bid) had been found noncompliant with the terms of the bidding procedures order [Docket No. 194].

The Debtor 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 were engaged in litigation relating to shared services and joint services agreements, and Nexstar raised objections to the Debtor's bankruptcy process.

Nexstar Dispute and Settlement

According to the Combined Document, the Debtor filed an Adversary Proceeding against Nexstar on March 31, 2020 and filed an Amended Complaint [Docket No. 8] on April 23, 2020. On August 27, 2020, Nexstar filed an Answer and Counterclaims in the Adversary Proceeding, alleging certain counterclaims against MBG. [Adv. Docket No. 59].

The Combined Document explains, "On April 15, 2020, the Debtor filed its Motion for Partial Summary Judgment with Respect to Count I (Turnover of Estate Property) [Adv. Docket No. 7], to which Nexstar responded with its Motion for Abstention or, in the Alternative, to Dismiss and Cross Motion for Partial Summary Judgment and Opposition to Debtor’s Motion for Partial Summary Judgment [Adv. Docket No. 14] (the 'Motion to Dismiss'). The Bankruptcy Court held a hearing on the parties’ cross-motions for summary judgment on July 6, 2020, and denied both motions without prejudice. [Adv. Docket No. 31]. Thereafter, on August 13, 2020, the Bankruptcy Court conducted a hearing on Nexstar’s Motion to Dismiss, which was granted in part and denied in part…[Adv. Docket No. 52]. On September 22, 2020, following demand by Nexstar, and a response thereto by the Debtor, Nexstar filed a motion for standing to assert certain alleged fraudulent transfer claims against Mr. Marshall in his individual capacity on behalf of MBG’s estate (the 'Motion for Authority') [Docket No. 362]. Nexstar agreed to extend the Debtor’s time to respond to the Motion for Authority given that, at the time, the parties were in settlement negotiations. As set forth below, the parties were able to reach a settlement of all matters between them, rendering the Motion for Authority moot.

After lengthy and extensive arm’s-length negotiations, the Debtor and Nexstar reached a settlement of all matters between them, as memorialized in the Settlement Agreement…The principal terms of the settlement called for (i) Nexstar to pay the Estate $2.25 million, (ii) full global releases between and among the Estate, Nexstar and Mr. Marshall and (iii) a dismissal of all Litigation and all Claims filed by Nexstar, as well a withdrawal of the Motion for Authority. On November 10, 2020, the Bankruptcy Court entered its Order (I) Authorizing and Approving the Settlement By and Among the Debtor and the Parties to the Settlement Agreement and (II) Granting Related Relief [Docket No. 375]. Thereafter, the settlement was consummated."

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. – With Sale and Nexstar Settlement Accomplished, Files Combined Chapter 11 Plan and Disclosure Statement; Founder Exploring E-Sports Business Model appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.


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