Video services company Deluxe Entertainment has avoided bankruptcy after reaching a debt-for-equity deal with the majority of its lenders.
According to Variety, Deluxe’s lenders are now set to take control of the company in a deal that will cut the company’s $780 million of outstanding debt in half. Deluxe Entertainment has been owned by Ronald Perelman’s holding company, MacAndrews & Forbes, since 2006.
In a report last month, Moody’s Investors Services said Deluxe had been dealing with negative cash flows caused by fewer major film releases, delays of film projects, and the decline in DVD and Blu-ray sales.
Moody’s downgraded Deluxe’s debt after the company decided not to deleverage by spinning off its creative services division.
Deluxe said it would offer a deal to all of its term-loan lenders to exchange their debt for 100 per cent of the equity of the new company. Deluxe said the move will have no effect on its operations and it will still deliver all current projects on time.
“The agreement is a positive step forward for Deluxe that will dramatically improve our liquidity and optimise the business,” said CEO John Wallace, in a statement. “Our business is strong, and upon completion of the comprehensive deleveraging, we’ll be further positioned for long-term growth and success.”
“MacAndrews & Forbes has been a proud sponsor of Deluxe for nearly 15 years,” the holding company said. “We have been fully supportive of the refinancing and restructuring process however, we have decided not to participate in the refinancing. We believe this refinancing will enable the company to continue to service its customers and partners well as it has for the last 100 years.”