Bloomberg News

Nebraska Book Files for Bankruptcy With Noteholders’ Support

June 27, 2011

(Updates with presidents comment in third paragraph)

June 27 (Bloomberg) -- Nebraska Book Co., an operator of a nationwide chain of college bookstores, sought bankruptcy protection with a pre-arranged plan supported by noteholders to restructure about $450 million in debt.

The company, based in Lincoln, Nebraska, listed about $657.2 million in assets and about $564 million in debt as of Feb. 14, including the debt and assets of affiliates, in Chapter 11 documents filed today in U.S. Bankruptcy Court in Wilmington, Delaware.

Nebraska Book reached an agreement on a restructuring with the support of more than 95 percent of the holders of its 8.625 percent senior subordinated notes and more than 75 percent of its 11 percent discount noteholders. The company said in a statement today it will restructure about $450 million in loans and bonds of its parent, NBC Acquisition Corp., and affiliates.

“This agreement solves balance sheet issues we have been addressing for months,” President Barry Major said in the statement. “We are clearing a path toward continued growth.”

“It will remain business as usual,” with little to no effect on operations, he added.

Nebraska Book started as a single bookstore in 1915 near the University of Nebraska college campus, according to court documents.

The company currently has about 280 stores on and off campus. It also has one of the largest wholesale distribution networks of used textbooks, supplying college bookstores with more than 105,000 different book titles and selling more than 6.3 million books a year.

‘Stagnant’ Profitability

The company said in court papers it was forced to seek bankruptcy after “several years of declining or stagnant levels of profitability” at bookstores, predominately those located off campus. Debt maturity also constrained liquidity.

The textbook retailer has adapted its business strategies, catering to the changing market by expanding its online presence in recent years as well as developing a textbook rental program, court papers show.

The company has more than $20 million of cash on hand, and has commitments for a $200 million loan to help fund operations while in bankruptcy, according to court documents.

Noteholder Control

Nebraska Book has proposed a restructuring that would turn control of the company over to noteholders, court papers show. “The plan is a remarkable result under the circumstances and will result in the highest possible recoveries for all stakeholders,” as well as a “full recovery by trade creditors and other general unsecured creditors,” Chief Financial Officer Alan G. Siemek said in court documents.

Under the proposal, $175 million in 8.625 million senior subordinated notes would be converted into $30.6 million in secured notes, $120 million in unsecured notes and 78 percent of the new equity, according to court filings. Holders of the $77 million in 11 percent discount notes would receive the remaining 22 percent of the stock.

Secured lenders, owed about $26.3 million, and secured noteholders, owed about $200 million, would be paid in full with cash.

The case is In re Nebraska Book Co. Inc., 11-12005, U.S. Bankruptcy Court, District of Delaware (Wilmington).

--Editors: Stephen Farr, Glenn Holdcraft

To contact the reporter on this story: Michael Bathon in Wilmington, Delaware, at mbathon@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net


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