Monitronics International, Inc., the wholly owned subsidiary of Ascent Capital Group, Inc., announced that it has voluntarily initiated its previously announced planned financial restructuring under Chapter 11 of the U.S. Bankruptcy Code to effectuate its partially pre-packaged Plan of Reorganization.
Under the terms of the proposed Plan, which now has the support of holders of approximately 91 percent in amount of the Company’s secured term loans and holders of approximately 81 percent in amount of its senior unsecured notes, the Company will eliminate approximately $885 million in debt and emerge from Chapter 11 in approximately 75 days with what it believes is the strongest balance sheet in its industry. The case will be heard in the U.S. Bankruptcy Court for the Southern District of Texas.
Monitronics expects to continue to operate its business in the ordinary course throughout the restructuring. The Company has filed the customary first day motions to ensure its continued ability to provide powerful home security to customers without interruption while meeting its commitments to employees, partner dealers, suppliers and other business partners. Additionally, the Company has secured a commitment for $245 million in debtor-in-possession (DIP) financing, which will be replaced by $295 million in exit financing at the completion of the reorganization to ensure the Company is able to execute on its strategic plan.
According to court documents, Encina Private Credit SPV is serving as administrative agent, swingline lender and as the letter of credit issuer; KKR Credit Advisors (US) LLC is listed as structuring advisor.
“We believe that our Plan of Reorganization gives us the strongest balance sheet in our industry – an enviable financial position that allows us to accelerate our growth and emerge as a stronger provider, employer and partner,” said Jeffery Gardner, President and Chief Executive Officer of Monitronics.
“Today’s Chapter 11 filing puts us one step closer to achieving our financial goals and, importantly, does so in way that ensures our continued ability to operate our business as usual and honor our financial commitments. I want to express my appreciation for the continued focus and commitment of the entire Monitronics team as well as the loyalty of our dealers, sales representatives, vendors and financial partners who have supported us through this process. We look forward to an even brighter future together.”
Under the terms of the proposed Plan, up to approximately $685 million of debt will be converted to equity, including up to approximately $585 million aggregate principal amount of the Company’s 9.125% Senior Notes due 2020 and $100 million of the Company’s term loans. The Company also expects to receive $177 million in proceeds through an equity rights offering, and an additional $23 million from either Ascent in connection with the previously announced merger into Monitronics (the “Merger”) or through a “backstop” commitment from certain of its noteholders. This cash will be used to, among other things, repay term and revolving loan debt.
Following the completion of the restructuring, the Company is expected to have approximately $990 million of total debt. Recurring monthly revenue (“RMR”) as of May 30, 2019, was $40.1 million.
Concurrent with the completion of the reorganization of Monitronics under the Plan, Ascent anticipates that it will consummate the Merger.