Freedom Communications filed a plan of reorganisation on October 31. The secured lenders, which account for $770m of Freedom’s debt, will receive $325m in new loans and 98% of the equity. They may also receive up to $15m in cash. Houlihan Lokey has valued the creditors' stock at between $90m and $190m, according to the bankruptcy filings.

The company has $312m in other liabilities. These consist of accounts payable, accrued salaries, wages and employee benefits, unearned revenue, accrued pension and other retirement related liabilities, deferred income taxes, and other miscellaneous liabilities. Some, but not all, of those owed money will be considered unsecured creditors. They will divvy up $5m, according to the reorganisation plan.

"I think it's immoral and wicked that we didn't get more consideration than $5m divided among all the unsecured creditors", Alan Bell, a former Freedom chief executive and now a member of the creditor committee told Reuters. Bell’s pension is at risk in the bankruptcy, according to the report. Freedom has $103m in unpaid pension and other retirement related liabilities.

The current equity holders, which include the Hoiles family and private equity firms Blackstone Group and Providence Equity Partners, will receive 2% of the common stock and warrants that entitle them to buy up to 10% of the outstanding stock. The exercise price of the warrants is set at a price per share that results in full recovery to the secured lenders plus 15%, which would require Freedom's equity value to rise to about $500m - more than three times the mid-point of Houlihan Lokey's current valuation.

Before the restructuring, the family owned 52% of the stock and Blackstone and Providence collectively owned 48%.

• Restructuring plan
• Reorganised value analysis 
• Exhibits to joint plan of reorganisation 

2 Sep 2009 -

Cognitive dissonance