July 10, 2008
Pappas Telecasting Will Seek $5 Million in Loans
By Rick Bentley, The Fresno Bee, Calif.
Jul. 10--Pappas Telecasting, owner of KMPH, Channel 26, was given permission by the U.S. Bankruptcy Court for the District of Delaware to seek a loan of $5 million. The July 3 ruling comes while the Visalia-based company is involved in two bankruptcy filings.Ed Harron, attorney for Pappas Telecasting owner Harry and Stella Pappas, said Pappas Telecasting has enough money to continue operations even if the loan had been denied. The additional money was needed to be a reserve while the bankruptcy proceedings continue and a buyer is found for a portion or all of the 30 TV stations and two radio stations the company owns across the United States.
Pappas announced in December that it was putting most of its stations up for sale. No deal has been made.
The money will come from a group of lenders that includes the companies that forced Pappas into a Chapter 7 bankruptcy filing in May. Lenders Fortress Credit Opportunities, Ableco Finance LLC and Silver Oak Capital LLC said Pappas personally owed them $15 million. And Pappas and his wife, Stella, personally guaranteed $30 million of a $284 million loan that Pappas Telecasting secured in March 2006.
Harron said borrowing money while involved in a bankruptcy case from lenders involved in the filing is common.
"Existing lenders have an interest in preserving their capital. The assets are worth more if the stations continue to operate," Harron said. "It is difficult to obtain a loan from a third party because of the bankruptcy. So you have to go back to existing lenders."
The interim ruling was made one day after Pappas Telecasting asked the court about the potential loan. Because it is an interim ruling, $1.5 million in loans can be obtained immediately. A final hearing would rule on additional loans up to the total of $5 million. No date has been set for the final hearing.
This is the latest action in connection with Pappas Telecasting filing for Chapter 11 protection in May. The bankruptcy filing was to give the company time to come up with a reorganization plan. According to the Chapter 11 filing, Pappas Telecasting owed $5.8 million to its top 20 creditors. The company's estimated assets, per the document, are between $100 million and $500 million.
The reporter can be reached at [email protected] or (559)441-6355.
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