Hedge fund Paulson & Co. is seeking to acquire up to 45% of Idearc Inc.’s common stock by offering creditors cash payment for the shares they are slated to receive under the directory publisher’s proposed reorganization plan.
In court papers filed Thursday with the U.S. Bankruptcy Court in Dallas, Paulson said its offer is based on the common stock having a value of $200 million. Idearc’s lenders are slated to take 95% of the reorganized company’s equity and unsecured creditors, including bondholders, would see 5% under a bankruptcy-exit plan Idearc sent out to creditors for a vote in September.
A holder of both secured and unsecured claims, Paulson is already in line to take 13% of the Idearc’s stock under the plan.
In court papers, Idearc said the deal with Paulson “will confer a benefit upon creditors not currently available under the plan.”
The deal, which requires court approval, would allow Paulson to name one member of Idearc’s board of directors if it succeeds in acquiring at least 20% of the shares.
To achieve that goal, Paulson can raise the price it is willing to pay for the stock and extend the time creditors have to consider accepting the plan.
The Dallas bankruptcy court will consider Idearc’s bankruptcy-exit plan at a Dec. 9 hearing. Paulson’s deal with the company requires that it emerge from Chapter 11 protection by Feb. 28, 2010.
Under the agreement, the percentage of shares the hedge fund can buy is capped at 45%, including the stock that it is already slated to receive under Idearc’s Chapter 11 plan. If creditors seek to exchange a greater percentage of shares, they would receive a combination of cash and stock to satisfy their debts.
The hedge fund also agreed not to attempt a takeover of Idearc following its exit from bankruptcy protection.
Idearc said the deal will stabilize its post-bankruptcy share price because creditors that would quickly sell their stock following emergence can instead select the cash option.
Idearc was spun out of Verizon Communications Inc. in 2006. The Dallas company’s restructuring plan eliminates $7 billion of the debt it took on as part of that transaction.
The company publishes Verizon’s print telephone directories and also hosts the online directory Superpages.com.