Penton's restructuring draws mixed reviews

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The reaction of Standard & Poor's Ratings Services to Penton Media's prepackaged Chapter 11 bankruptcy filing last week was to downgrade Penton Media Business Holding's corporate credit rating to D. Other industry observers had a more positive impression of Penton and its future. “It's really not surprising,” said Mike Parker, managing director at AdMedia Partners. “I don't think that this is the last we've heard of these situations,” Parker said. Advanstar, Cygnus Business Media and Questex Media have either financially restructured or filed for bankruptcy protection in the past year. Ed Fitzelle, managing director at Whitestone Communications, noted that Penton has also made moves to restructure its business. “The cost side should be much lower,” he said. However, he added, Internet revenue is not yet replacing print revenue in b-to-b media. Roland DeSilva, managing partner at DeSilva & Phillips, said the filing documents reveal Penton to be a company making the right moves as it positions itself more as a digital, business information and marketing services company. He said he expects digital revenue to begin increasing over the next several years. “They will be making more from digital media and, eventually, this will be more profitable revenue,” he said. DeSilva added: “The chances of success are very good simply because of what they've put into place in the company. The transition of the company into an information company is progressing; the pieces to that puzzle are in place. The restructuring will give them the ability to implement that.” The restructuring includes a $270 million reduction in debt; a capital infusion from the equity partners, led by MidOcean Partners and Wasserstein Partners, which will be between $38.9 million and $51.2 million; and an extension of the senior security facility through 2014. The company said it has between 10,001 and 25,000 creditors. Its biggest nonsecured creditor is printer WorldColor USA Corp., at $1.6 million. Another printer, R.R. Donnelley & Sons Co., is Penton's second-largest nonsecured creditor, at $1.4 million. When asked if there is less stigma associated with a b-to-b media company undergoing a restructuring now because so many other companies are in the same boat, Warren Bimblick, Penton's senior VP-strategy and business development, responded, “There is less "stigma' associated with a restructuring where the restructured company gets the best of three worlds: less debt; an equity infusion from its owners, who are committed to the company's growth plans; and an extension of maturity.” Bimblick also expressed confidence in Penton's brands. “We believe most of our businesses have the ability to be leaders,” he said. The restructuring documents show that the company's revenue declined 26.2% in 2009, falling to $300.81 million from $407.53 million in 2008, when revenue fell 7.5% from 2007's total of $440.72 million. Penton expects revenue to tumble again this year, falling 3.8% to $289.45 million. The company anticipates returning to revenue growth in 2011. Bimblick said the growth will come in part from restructuring the company, not just its debt. “At Penton, we believe that audience, content, sales and support services need to work more closely than ever to make this all work. And it is a lot of work, particularly when you are in 16 markets,” he said. The 16 markets may be a difficult hurdle, some observers say. One school of thought holds that the best-positioned b-to-b media companies are focused on, at most, a handful of markets where they can provide deep knowledge of a vertical industry and marketing services to companies serving that industry. It remains to be seen if Penton's restructuring has put the company on the right track or merely put off a reckoning until 2014, when, court documents show, the company will still have about $600 million in first-lien debt. M
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