Sorenson Communications Inc., a provider of video services for the deaf partly controlled by Madison Dearborn Partners LLC, filed for bankruptcy, blaming price cuts and service requirements imposed by federal regulators.
Sorenson had about $645 million in assets and $1.4 billion in liabilities as of Jan. 31, it said today in court papers filed in U.S. Bankruptcy Court in Wilmington, Delaware. The Salt Lake City-based company is regulated by the Federal Communications Commission.
“Compliance with the FCC’s reforms will result in a reduction in the debtors’ operating cash flow to levels that cannot support their capital structure,” Chief Financial Officer Scott Sorenson said in an affidavit filed in court.
The company owes about $546 million in loans that mature on Oct. 31 and $735 million in notes due Feb. 1. It owes about $25 million on a revolving credit line.
The notes, which pay an interest rate of 10.5 percent, fell 1.3 percent today to 88.8 cents on the dollar, according to data compiled by Bloomberg.
More than 120,000 people used the company’s services last year. Sorenson employs about 6,800 workers, it said in court papers.
The company has a restructuring agreement with the majority of investors who hold the notes. Under that plan, it would be 87 percent-owned by the noteholders. To exit bankruptcy, Sorenson would borrow as much as $550 million, a loan that some noteholders would help arrange.
Should U.S. Bankruptcy Judge Mary F. Walrath approve the proposal, the $546 million in loansSorensen owes would be repaid in full, and the notes would be traded for ownership stakes, new debt and cash. Existing owners would also get new debt and equity. Sorenson is currently controlled by Madison Dearborn and GTCR Golder Rauner LLC, both based in Chicago.
Standard & Poor’s last year downgraded Sorenson to CCC with a “negative outlook” on concern it might default on bank debt that expires in October. The $550 million term loan, obtained in March 2013, began paying interest at 8.25 percentage points more than the London interbank offered rate with a 1.25 percent minimum on the lending benchmark, according to data compiled by Bloomberg
Sorenson began in 1996 as Sorenson Laboratories Inc., which was trying to develop low-cost video conferencing for consumers. By 2003 the company had won authorization from state officials in Utah to provide video relay services to the deaf and hearing- impaired.
The case is In re Sorenson Communications Inc., 14- bk-10454, U.S. Bankruptcy Court, District of Delaware (Wilmington).