Fort Atkinson, Wis.—Cygnus Business Media, publisher of Firehouse magazine and other b-to-b properties, announced Monday that is has filed for Chapter 11 bankruptcy protection with the U.S. Bankruptcy Court for the District of Delaware in Wilmington. The company had hoped to avoid bankruptcy court, but a single holdout among its 24 lenders refused to agree to an out-of-court financial restructuring.
“The lender that held out is foolish. All that lender is doing is destroying value that exists in Cygnus,” said Roland DeSilva, managing partner of media investment bank DeSilva & Phillips.
The pre-packaged financial restructuring, which was submitted to the court, outlines how the company's debt will be restructured, how creditor claims will be satisfied and how a portion of the company's secured debt will be converted to equity. Cygnus secured debt is anticipated to be reduced from about $180 million to about $60 million as a result of the agreement. Cygnus said that this strengthening of its balance sheet will bring its debt down to a serviceable level.
As the senior lender, GE Commercial will own the majority of the restructured company. Cygnus said it expects to gain court approval and emerge from bankruptcy in 45 days. The restructuring plan calls for Cygnus to pay 100% of its debts to its vendors.
“Our business sectors show positive contribution because our brands are narrowly focused on the specific needs of thousands of advertisers, exhibitors, marketers, subscribers and online visitors,” Charles Carnaval, Cygnus Business Media CEO, said in a statement. “During the next month or so, while we complete the legal process, our business will continue without interruption to meet the needs of the customers in our vertical markets. We have sufficient funds to support our working capital needs.”
Industry observers expect John French, former CEO of Penton Media, to be named as the new CEO of the Cygnus Business Media within the month. A spokesperson for Cygnus refused comment.