Ion Media: When Junk = Junk

It seems like I've been missing out on a lot of news lately. Apparently, Ion Media issued its joint plan of reorganisation in relation to its Chapter 11 bankruptcy filing back in August. Where was I all this time? Correct answer: Bimbo Land.

Anyway, it does not look good for low priority bondholders of CUSIP 46205AAB9, such as myself.

Basically, they are proposing the following:

Class 1 Creditors will more or less receive the full amount of their claims in cash (page 22).

Class 2 Creditors will have the $150 million debt that Ion Media owes them exchanged for 62.5% of new equity in the reorganised Ion Media. This seems like a good deal for them in my opinion when you consider what the rest of the lower priority creditors get. Class 4 and Class 5 Creditors are funding this entire reorganisation (see below).

Class 3 Creditors receive a 37.5% share of equity.

Class 4 Creditors will receive warrants to purchase 5% of new common stock for $1 billion. If I did the math correctly, this means that anyone who exercises these warrants is effectively paying for the company as if it is worth $20 billion.

Class 5 Creditors will receive warrants to purchase 5% of new common stoc for $1.5 billion. Here, we are paying for the company as if it is worth $30 billion. LOL.

And according to Ion's own Web site, "all outstanding ION equity interests, including common stock, preferred stock and any options, warrants or rights to acquire any equity interests, will be cancelled and extinguished and holders thereof will not receive a distribution."

This is worse than my GBP/JPY trade from Friday!

Unless, for some odd reason Ion's new stock skyrockets and its market cap exceeds $30 billion. I wonder how old I'll be when that happens?