Daily News: July 16, 2012

MCG Capital Announces Restructuring of Broadview Networks Holdings

MCG Capital Corporation announced that Broadview Networks Holdings, Inc., a majority-owned, control investment of MCG, has entered into an agreement with certain of its equity holders (including MCG) and noteholders providing for a restructuring of its outstanding obligations, including its $300 million 11 3/8% senior secured notes due in September 2012.

As disclosed in its filings with the SEC, Broadview has agreed to solicit consents to file a pre-packaged Chapter 11 plan of reorganization with the U.S. Bankruptcy Court for the Southern District of New York. The holders of approximately 70% of Broadview’s outstanding preferred stock (including MCG) and more than 66 2/3% of the notes have consented to vote for the plan, subject to the satisfaction of certain terms and conditions, which percentages would be sufficient to approve the plan. The plan provides that upon the effectiveness of the plan, the existing noteholders will exchange the notes for new common stock representing 97.5% of the common stock of the reorganized company and $150 million in principal amount of new 10 1/2 % senior secured notes due in July 2017, and existing stockholders, including MCG, will each receive a pro rata share of the remaining 2.5% of the common stock of the reorganized company and two tranches of eight-year warrants with exercise prices set at equity values that imply full recovery for existing noteholders. All ownership percentages are subject to dilution by the exercise of warrants and equity to be issued under a management incentive plan. If the restructuring is consummated on the contemplated terms, MCG estimates that the value of its investment in Broadview on a post-restructure basis will be approximately $1 million.

The reduction in debt will lower the company’s interest expense by $18 million annually, providing for lower leverage and more financial flexibility.

“We are excited to have reached an agreement with our noteholders and major equity holders on a consensual financial restructuring plan that will equitize a significant portion of our bonds and put Broadview Networks in a financially stronger position,” said Michael K. Robinson, president and CEO of Broadview Networks.

The company’s restructuring counsel is Willkie Farr & Gallagher and its financial advisor is Evercore Group. The restructuring counsel for the ad hoc group of noteholders is Dechert and their financial advisor is FTI Consulting.

Broadview is a competitive communications and IT solutions provider to small and medium sized businesses and enterprise customers in markets across 10 states throughout the Northeast and Mid-Atlantic United States.

MCG Capital Corporation is a solutions-focused commercial finance company providing capital and advisory services to middle-market companies throughout the United States.