UPDATED: Creditor Files to Liquidate Equity Media, Claims Company Cannot Meet Payroll Obligations

by Mark Hengel  on Wednesday, Dec. 10, 2008 12:29 pm  

● Making false certifications to the Federal Communications Commission, causing the FCC to place on hold "license renewal, license assignment, and transfer of control applications" for most of Equity Media's full-power TV stations;

● Failing to pay a satellite service provider, resulting in the provider threatening to cut service on Dec. 3; and

● Breaching obligations to pay CBS $1.3 million.

Silver Point is requesting the appointment of a receiver to maximize the value of property owned by Equity Media and "liquidate the Lenders' secured interest therein," according to documents. (For a list of Equity Media's 49 properties that Silver Point lists as collateral, click here. For a timeline of 2008 events leading to Equity Media's bankruptcy filing, click here.)

Silver Point officials declined to comment.

Equity Media (%% NASDAQ:EMDA %%) has a current market capitalization of $2.82 million, with shares trading at 7 cents on Tuesday. The company's market capitalization dropped to $1.61 million Wednesday, while trading at 4 cents a share at about 2 p.m. The company's initial public offering in September 2005 raised $69 million at $6 per share according to the company's Web site.

The company lists its assets as worth more than $100 million and liabilities as more than $50 million in its bankruptcy filing. Media broker Lawrence Patrick appraised the company's assets at between $35 and $40 million. Patrick said it is likely the company's assets are worth less than its liabilities, although Equity believes otherwise. Equity lists assets worth $103 million and total current liabilities totaling about $112 million, according to its third quarter filing with the SEC.

"Part of the problem for equity is these are people who I would give an A-plus in technology," Lawrence Patrick said, adding the company was ahead of the curve in creating technology to centralize distribution. "While it is one thing to build the stations and hook them all together and operate them out of a centralized hub, they have never been able to monetize them."

Self Interest

Chief among Silver Point's arguments is that Equity managers were looking out for themselves is the threat by Equity Chairman Richard Rochon to allow the company's assets to "go dark" rather than allow liquidation. Silver Point also alleges Equity Media's management engaged in "self-serving" transactions involving Retro Television Network Inc. The company's board owns about 25 percent of the company's total equity, according to court records.

The complaint claims Rochon and members of Equity's board threatened to shut down operations "because of purported fears that it would not be able to make the next payroll."

Rochon told Silver Point "he would never work with Silver Point to facilitate an orderly bankruptcy of [Equity] to sell assets, rather he and certain other Board members would simply resign, allow [the companies'] stations to cease operations and 'go dark' and walk away from the company," according to the filing.



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