Case 4 New Media Corporation

Richard Marney () and Timothy Stubbs ()

Chapter Chapter 7 in Emerging Markets Debt Restructuring, 2024, pp 339-374 from Springer

Abstract: Abstract In this chapter, the last of four case studies is presented. This case deals with a fast-growing media and telecom company, which sets out on an ambitious plan to build a nationwide fiber optic network to link the urban centers and major suburbs throughout the country. This high-speed broadband platform would be the cornerstone of a robust, integrated media and telecommunications business. Management makes a serious error in the capital budget for this immense project, by failing to arrange sufficient equity capital and long-term debt to ensure that future debt service obligations are well-calibrated with conservatively projected future operating cash flows. When a risk-off episode hits the EM space, the company becomes unable to meet its debt service burden with new debt. In this period, the company commits a second, serious error in contracting high-yield debt from an aggressive, vulture-type fund. The company is forced to address its problems in an undeveloped restructuring environment, which gives the vulture fund an opening to strip valuable assets. Ultimately, despite aggressive and illicit actions on the part of the vulture fund, the company succeeds in closing a series of divestiture transactions that leads to the reestablishment of financial stability and the creation of a smaller, but sustainable business.

Keywords: Capitalism; Soviet bloc; Civil law; Insolvency framework; Kleptocracy; Insolvency office holders (IOH); Capital flows; Currency peg; Free to air radio and television; Cable television (CATV); Mobile cellular telecommunications; Fiber optic network; Broadband (high-speed) internet; Leverage; Debt service coverage; Private placement; Public and private equity; Cash flow from operations; Cash flow before external financing; ESOP; Voluntary judicial restructuring regime; Risk-off episode; Transfer of assets; Assumption of debt; LCIA; New York Convention; Debt profile; Majority shareholder; Minority shareholder; Rights issue; Covenant breach; Event of default; Acceleration; Enforcement; Legal audit; Finance documents; Super senior debt; Restructuring agreement; Existing finance documents; Inter-creditor agreement; Representations and warranties; Security; Longstop date; Governing law and dispute resolution; Accession mechanism; Undertakings of obligors (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/978-3-031-66838-8_7

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