What is ahead of shareholders and creditors of KIT digital in the following weeks? What is the current stage of the reorganization process? What are the chances for Czech shareholders to influence the events in New York? Patria.cz presents exclusive interview with Interim Chief Executive Officer in KIT digital K. Peter Heiland.
Patria.cz: What is the current stage of the reorganization process? Do the bankruptcy proceedings go according to plan?
Last week, the bankruptcy court approved the Company’s post-petition financing on a final basis. The court will consider final approval of the Company’s motion to enter into the Plan Support Agreement in the next couple of weeks. The Plan Support Agreement sets the framework for proceeding towards confirmation of the Plan. The next steps in the process after approval of the Plan Support Agreement will be (i) consideration of the Company’s proposed disclosure statement; (ii) dissemination of the court-approved disclosure statement for voting on the Plan; and (iii) a confirmation hearing where the court will consider confirmation of the Plan. The Company believes that it is still on-track to exit chapter 11 by the end of the summer.
Patria.cz: What can you say about the Ad Hoc Konsorcium objections to the reorganization plan and the costs and risk to shareholders?
The bankruptcy court conditionally approved the motion to enter into the Plan Support Agreement at the hearing on May 22, but indicated that no order would be entered on the Plan Support Agreement until an equity committee is formed and has a chance to consider the Plan Support Agreement. The Company understands that an equity committee is likely to be appointed in the next week or so. Accordingly, the court will likely make a final decision on the Plan Support Agreement in the next couple of weeks. Approval of the Plan Support Agreement does not constitute approval of the Plan. Parties in interest will have an opportunity to raise issues with, or objections to, the Plan at a later date in connection with the eventual hearing to consider confirmation of the Plan. The Company continues to believe that the Plan Support Agreement maximizes value for all of its stakeholders and it, therefore, will be approved by its creditors and equity holders. The Company intends to cooperate as much as it can with the equity committee in an effort to minimize costs and delay to its reorganization.
Patria.cz: Should we expect 1Q13 results (at least in broad strokes) to be presented before the court decides on the plan of reorganization? And if so, when? How will you deal with the past misleading results of since 2009?
The Company will continue to file with the bankruptcy court monthly operating reports, which contain certain financial information, as required in connection with the chapter 11 process. Those monthly operating reports can be obtained within 48 hours of filing through the website for the Company’s claims agent. The website address is www.americanlegalclaims.com. The Company does not currently intend to publish financial information other than as disclosed in the monthly operating reports and the proposed disclosure statement filed with the bankruptcy court or as otherwise deemed necessary to file with the bankruptcy court during the chapter 11 process.
Patria.cz: Should we expect to issue an official statement regarding the plan of reorganization or present it to the public in another form before the court finally decides on the plan?
It is possible that the Plan and proposed disclosure statement are updated or modified during the process leading up to the bankruptcy court’s consideration of confirmation of the Plan. Any such material amendments will be filed with the bankruptcy court in due course during the process and will be available on the website of the Company’s claims agent.
Patria.cz: How long will it be possible to trade in KIT shares on OTC Pink Sheets? Until the court issues a non-appealable ruling regarding the reorganization (Effective date), or until warrants to purchase Piksel shares are issued?
It is not certain how long shares in Inc. will continue to be traded. The shares, however, will be cancelled once the Plan becomes effective and parties entitled to warrants under the Plan will be distributed warrants that can be exercised within the time period required.
Patria.cz: After the warrants have been distributed, their owners have 30 days to exercise them. Will it be possible to trade in those warrants during this time? What will happen to them after the period expires?
The warrants will not be transferable and will expire after the term to exercise them expires.
Patria.cz: If all the warrants were to be exercised, how big a stake would the Plan Sponsor Group end up owning? How many shares of Piksel would be issued in total?
As described in more detail in the proposed disclosure statement, notwithstanding the number of warrants exercised, at the end of the exercise period, the Plan Sponsor Group will retain no less than fifty percent (50%) of the Reorganized KDI Class B Common Stock which shall be convertible into no less than 44.645% of Reorganized KDI Class A Common Stock (subject to dilution for any Management Equity Incentive Plan, the Reorganized KDI Class A Common Stock to be issued to WTI on account of the WTI Secured Claims, and any Commitment Fee payable to the Plan Sponsor Group in shares of Reorganized KDI Class A Common Stock).
Patria.cz: Financial projections released in the disclosure statement contain an outlook for 2014 and 2015. Were potential revenues from recently presented products 2Si and Kit Cloud included in these projections?
Unfortunately, this is not information that has been publicly disclosed. It is possible, however, that additional information regarding the financial projections in the proposed disclosure statement may be disclosed at a later date as the Company proceeds toward the goal of confirming the Plan.
Patria.cz: What are the prospects of Piksel? Where do you personally see the company in five years?
After having been a part of the day-to-day management team of the company for almost 9 months, I believe that we have achieved a lot. We have streamlined the business by focusing on 5 operating entities and exiting all others. We have agreed on a strategy in pursuit of a global leadership position for products and services for video delivery using OTT and OVP. We know that the company has many exceptional employees and a long list of world-class customers. Therefore, we believe reorganized KDI’s prospects are good.
Through the chapter 11 process, KDI hopes to address, in a streamlined fashion, its pending litigation claims as well as to complete the divestiture of unprofitable non-core subsidiaries. Assuming the favorable resolution of both of these, reorganized KDI (Piksel) should be a healthier, focused company that will be poised to take advantage of the burgeoning demand in its industry. It will also benefit greatly from the financial “fresh start.”
As the interim CEO, a member of the Plan Sponsor Group and a current shareholder, I am obviously very biased and I encourage all other shareholders and creditors to decide for themselves what they believe the prospects will be for Piksel, based on the public information that has been, and will be, filed with the bankruptcy court.
Patria.cz: Can Piksel eventually be sold to a strategic investor? Will it go public? Will the minority shareholders get a chance to exit their investment?
The Company cannot say at this juncture what the ultimate future will be for Piksel, and shareholders will need to decide for themselves what the future may hold in connection with determining whether to exercise any warrants.