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

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

Silver Point believes Rochon's threat was merely a ploy, according to court documents. The company's payroll for the two weeks starting Nov. 17 stood at $308,000, according to Silver Point's projections outlined in the complaint, while cash projections for Equity Media totaled $580,000 for the two-week period.

"Accordingly, it appeared that [Equity] would be able to meet payroll and that the threat to 'go dark' was nothing but an attempt to force the Lenders to provide further concessions," according to the complaint.

Silver Point also alleges former Equity CEO Larry Morton secured the intellectual property rights for Retro Television Network at the expense of Equity Media, allowing him to receive a slice of future RTN revenue through royalty payments and a 20-percent stake in any future sale of the property.

RTN is a business developed by Equity Media that provides content to local stations to broadcast on excess digital bandwidth. The network allows stations to pair local content with content provided by RTN, including reruns of several TV shows. To date, at least 75 stations in 39 states have signed up, according to RTN's Web site.

Patrick, the media broker, said RTN is likely the most valuable entity created by Equity's management and said that the network's success signing partners shows that it will likely remain a viable business plan.

Equity sold RTN to Luken Communications of Chattanooga, Tenn., which is owned by Henry Luken, who was also a former CEO of Equity Media. The sale totaled $18.5 million.

"This mismanagement and abuse of fiduciary duties by [Equity's] senior management and/or Board members has served only to impair the value of the Lenders' collateral," according to court documents.

Luken had resigned his posts with Equity Media before the deal took place.

Failure to Sell

As part of the lending agreement, Equity also agreed to sell assets before Sept. 17 as required by an agreement with Silver Point.

Equity "either had no intention of effectuating the station sales pursuant to the Letter Agreement or were ineffective and disorganized in doing so," according to court documents.

The company's marketing agent, Patrick Communications, allegedly found possible buyers for stations "on reasonable market terms" agreed upon with Silver Point but failed to make the sale by increasing the price, according to court documents.

 

 

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