A battle over the future of West Chester-based QVC Group is playing out in a Texas courtroom, where a group of preferred shareholders are fighting to block a bankruptcy reorganization plan they say would wipe out their investment while benefiting creditors, writes Jeff Blumenthal for the Philadelphia Business Journal.
Judge Alfredo R. Perez in the U.S. Bankruptcy Court is weighing the challenge this week as part of a multi-day hearing to confirm the Chapter 11 reorganization plan.
The dispute surrounds a possible transfer of $195 million in cash and a 62 percent stake in Cornerstone Brands from QVC Group’s parent company to its indebted operating subsidiary, QVC Inc. The 12 shareholders, who own about 22 percent of the company’s outstanding equity, say that move would allow creditors to be paid while leaving their preferred shares worthless.
Their own liquidation analysis argues that blocking the transfer would preserve more than $160 million for them.
Ted Gavin, managing director and founding partner of Wilmington-based Gavin Solmonese, said shareholders rarely prevail in these situations unless they can prove the plan violated the principles of good faith and fair dealing. Tim Hynes, Debtwire’s global head of credit research, sees a settlement as the more likely outcome and warns that pushing too hard could backfire.
“The preferred shareholders won’t get everything that they believe they’re entitled to, because it could cause Silver Point, SVP, and the other senior creditors to say, ‘We’re done,’” Hynes said. “And then everything kind of unravels.”
QVC Group filed for Chapter 11 protection on April 16. The prepackaged deal with creditors would eliminate all but $1.3 billion of the company’s $6.6 billion debt load, with investment firms Silver Point Capital and Strategic Value Partners positioned to take on significant ownership of the reorganized company.
Read more about the shareholder challenge and what it could mean for the future of QVC Group in the Philadelphia Business Journal.
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