Metromedia International Group, Inc. (“MIG” or “Debtor”), filed for bankruptcy on June 18, 2009 in the United States Bankruptcy Court for the District of Delaware. According to the Declaration in Support of MIG’s Chapter 11 Petition (the “Declaration”), MIG filed for bankruptcy due to entry of a judgment in an action commenced by various MIG preferred shareholders (the “Shareholder Action”). On June 5, 2009, the Court of Chancery of the State of Delaware entered a judgment against MIG for $188 million.
The Shareholder Action was the result of shareholders seeking an appraisal of MIG’s assets following a merger between MIG and CaucusCom. MIG contends that the judgment entered in the Shareholder Action is “substantially overstated,” causing MIG to appeal to the Delaware Supreme Court. Despite filing the appeal, MIG was unable to stop the shareholders in the Shareholder Action from executing on the Delaware judgment. By filing for bankruptcy, MIG was able to stay the execution of the Shareholder Action through the automatic stay under section 362 of the Bankruptcy Code.
MIG’s Corporate History
From its beginnings in the 1920s in to the 1990s, MIG operated businesses in the entertainment, photo and lawn and garden industries. At different times in its history, MIG operated under the names “The Actava Group” and “Fuqua Industries.” Following mergers in 1995, MIG began shifting its operations to media, communications and entertainment in emerging countries that were previously part of the Soviet Union. By 1997, MIG sold off most of its U.S. assets to MGM for $573 million. Five years later, MIG used the proceeds from the sale to MGM to develop phone, radio and cable ventures in eastern Europe, Russia and Asia.
By 2003, after several years of growth, MIG found itself low on cash and forced to sell assets and cut overhead. Within two years of implementing a restructuring program, MIG scaled its business back so that all of its operations were limited to the Republic of Georgia.
In 2007, MIG’s board approved the sale of its common stock to a joint venture between Sun Capital Partners and Salford Capital Partners. By August of 2007, Sun Capital and Salford Capital, under the name “CaucusCom,” acquired 90% of MIG’s stock. Following the stock purchase by CaucusCom, MIG’s preferred shareholders exercised their right to demand an appraisal of the fair market value of their shares.
Going into bankruptcy, MIG lists its principal asset as 46% of the membership interests in International Telcell Cellular (“ITC”). According to MIG’s Declaration, ITC owns Magticom, the largest cellular and fixed phone provider in Georgia. MIG also owns interests in Ayety TV, a Georgian cable provider and Telenet, an internet service provider.
Besides its corporate assets, MIG has nine employees who control the Debtors’ operations and investments. Two of Debtors’ employees are based in the U.S., while the remaining seven work in London and Georgia.
This bankruptcy proceeding is before the Honorable Kevin Gross.