UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) April 14, 2005
ATX COMMUNICATIONS, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 000-49899 13-4078506
(State or Other Jurisdiction (Commission (IRS Employer
Of Incorporation) File Number) Identification No.)
2100 Renaissance Boulevard, King of Prussia, PA 19406
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(Address of principal executive offices) (Zip Code)
(610)755-4000
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(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
SECTION 1 - REGISTRANT'S BUSINESS AND OPERATIONS
ITEM 1.03 BANKRUPTCY OR RECEIVERSHIP.
On January 15, 2004 (the "Petition Date"), ATX Communications, Inc.
("ATX" or the "Company") filed a voluntary petition for relief under chapter 11
of title 11 of the United States Code (the "Bankruptcy Code") in the United
States Bankruptcy Court for the Southern District of New York (the "Bankruptcy
Court"). On the Petition Date, 31 of ATX's subsidiaries also filed voluntary
petitions for relief under chapter 11 of the Bankruptcy Code in the Bankruptcy
Court. On March 10, 2004, CoreComm Maryland, Inc., also a subsidiary of ATX,
filed a chapter 11 petition in the Bankruptcy Court. By Order signed April 13,
2005 and entered April 14, 2005, the Bankruptcy Court confirmed the Debtors'
Modified Second Amended Joint Plan of Reorganization Under Chapter 11 of the
Bankruptcy Code (as amended and/or modified, the "Plan"). A copy of the Plan as
confirmed is attached hereto as Exhibit 2.1.
On April 14, 2005, the Company had 30,000,054 shares issued and
outstanding and 1,000,000 shares reserved for future issuance in respect of
claims and interests filed and allowed under the Plan, for an aggregate total of
31,000,054 shares. Information as to the assets and liabilities of the Company
may be found in the Consolidated Monthly Operating Report for the Period from
February 1, 2005 to February 28, 2005 (the "Monthly Operating Report"), as filed
with the Bankruptcy Court, which is filed as Exhibit 99.1 hereto and
incorporated herein by reference. Such Monthly Operating Report contains an
unaudited condensed consolidated balance sheet as of February 28, 2005 and
January 31, 2005.
The Plan provides for the substantive consolidation of the Debtors
and is the product of the successful conclusion of comprehensive settlements
with Verizon Communications, Inc. ("Verizon") and SBC Communications, Inc.
("SBC"), and a compromise and settlement among the Debtors, the Creditors'
Committee and Leucadia National Corporation ("Leucadia"), the Debtors'
prepetition and postpetition senior secured lender. The following is a summary
of the material features of the Plan (capitalized terms used but not defined
below have the meanings given to them in the Plan):
A. Summary of Key Settlements Approved Pursuant to the Plan
Creditors' Committee Settlement: Pursuant to the settlement with the
Committee, the Plan provides that holders of: (a) Allowed Class 6 Claims
(Convenience Claims) (i.e., general unsecured claims of $5,000 or less or claims
voluntarily reduced to that amount by a creditor) will receive a Cash
distribution equal to 15% of their Allowed Claim; and (b) Allowed Class 7 Claims
will receive their Pro Rata share of the Class 7 Cash Amount, which is expected
to be $7 million. As a result of the settlement agreements between the parties,
the unsecured claims of Leucadia, and virtually all of the general unsecured
claims of Verizon and SBC will not share in or dilute Class 7 creditor
recoveries from the Class 7 Cash Amount. The Claims of SBC and Verizon will be
treated pursuant to their respective settlement agreements. The aggregate amount
of claims asserted by Leucadia, SBC and Verizon that will no longer share in
Class 7 distributions exceeds $200 million dollars. As a result, the Debtors
estimate that the total Allowed Class 7 Claim pool will be reduced to between
$70 - $80 million, and that Class 7 creditors ultimately will receive
distributions in the 8.75% to 10% range. In addition, the Class 7
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Cash Amount may be increased by an amount equal to eight percent (8%) of the net
proceeds, if any, in excess of $3,500,000 received by the Debtors or Reorganized
Debtors in respect of any Avoidance Actions, after payment of all costs of
prosecution, settlement and collection. However, given the uncertainties of
litigation, there can be no assurance that any such additional amounts will be
received.
Verizon Settlement Agreement: The principal terms of the Verizon
Settlement provide that the Debtors will assume certain of their executory
contracts with Verizon and reject others, and in connection with the assumption
of certain of its agreements with Verizon, the Debtors will, (a) make a cure
payment to Verizon in the amount of $16.5 million, (b) allow the balance of
Verizon's Claim as a General Unsecured Claim in the aggregate Allowed amount of
$37.5 million (although Verizon has agreed that it will not be entitled to
recover on account of such Claim unless and until the recovery of other holders
of Allowed General Unsecured Claims exceeds 15%), (c) sell or close down certain
of their operations in the states of New York and Massachusetts within 90 days
of the Effective Date, subject to the receipt of any necessary regulatory
approvals, and (d) make certain additional payments to Verizon in the event that
any other executory contract party to whom the Debtors make a cure payment in
excess of $500,000 receives a recovery on account of its cure claim that, on a
percentage basis, exceeds the cure recovery percentage received by Verizon
pursuant to the Verizon Settlement Agreement. Pursuant to the Verizon Settlement
Agreement, the Debtors also must deliver written releases in favor of Verizon by
the executive officers designated in Attachment 4 to the Verizon Settlement
Agreement.
SBC Settlement Agreement: The principal terms of the SBC Settlement
Agreement provide that, in consideration for SBC's support of the Plan, the
Debtors will sell or shutdown certain of their Mid-West CLEC operations,
businesses which, in the past, have relied heavily on interconnection agreements
with SBC for the provision of their services. SBC will receive 45% of the net
proceeds of the sale of the Mid-West CLEC operations in full and final
satisfaction of SBC's Claim(s) against the Debtors, as more fully described in
the settlement agreement. If 45% of the net proceeds of such sale, divided by
SBC's Allowed General Unsecured Claim, is less than the Pro Rata distribution to
Class 7 Claim holders, then SBC will be entitled to the same Pro Rata
distribution as the other holders of Allowed Class 7 Claims. Leucadia has agreed
that SBC's Allowed General Unsecured Claim will be satisfied from funds of the
Reorganized Debtors or Leucadia rather than the Class 7 Cash Amount, regardless
of whether the sale proceeds are sufficient or the Mid-West CLEC assets are
sold.
B. Summary of Plan Distributions
Below is a summary of the treatment accorded each Class of Claims
and Equity Interests under the Plan:
DESCRIPTION TREATMENT
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Leucadia DIP Claims Unless otherwise agreed by Leucadia, on the Effective Date, Leucadia shall be paid 100%
of the unpaid, non-contingent amount of the Leucadia DIP Claims pursuant to the terms of
the underlying loan documentation.
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Administrative Expense Claims Except (i) to the extent that the holder of an Allowed Administrative Expense Claim has
agreed to less favorable treatment of such Claim or (ii) to the extent such claim is an
Allowed Fee Claim, on the later of the Effective Date and the date such Administrative
Expense Claim becomes Allowed, or as soon thereafter as is practicable, each holder of an
Allowed Administrative Expense Claim will receive Cash in an amount equal to the Allowed
amount of such Claim.
Fee Claims Unless otherwise agreed by the holder of an Allowed Fee Claim, each holder of an Allowed
Fee Claim shall receive payment in full of the Allowed amount of the Fee Claim (a) no
later than five (5) Business Days after such Fee Claim becomes Allowed or (b) upon such
other terms as may be mutually agreed upon between the holder of such Fee Claim and the
Reorganized Debtors.
Priority Tax Claims Except to the extent that the holder of an Allowed Priority Tax Claim has been paid by
the Debtors prior to the Effective Date or has agreed to a different treatment of such
Claim, each holder of an Allowed Priority Tax Claim will receive, at the sole option of
the Reorganized Debtors, either (a) Cash in an amount equal to the Allowed amount of such
Claim on the later of the Effective Date and the date such Priority Tax Claim becomes
Allowed, or as soon thereafter as is practicable, (b) deferred Cash payments, over a
period not exceeding six years after the date of assessment of such Claim, of a value, as
of the Effective Date, equal to the Allowed amount of such Claim with interest at 5% per
annum, or (c) upon such other terms determined by the Bankruptcy Court to provide the
holder of such Allowed Priority Tax Claim deferred Cash payments having a value, as of
the Effective Date, equal to the Allowed amount of such Claim.
Other Priority Claims Except to the extent that the holder of an Allowed Other Priority Claim has been paid by
the Debtors prior to the Effective Date or has agreed to a different treatment of such
Claim, each holder of an Allowed Other Priority Claim shall receive Cash in an amount
equal to the Allowed amount of such Claim on the later of the Effective Date and the date
such Claim becomes Allowed, or as soon thereafter as is practicable.
Secured Tax Claims Except to the extent that the holder of an Allowed Secured Tax Claim has been paid by the
Debtors prior to the Effective Date or has agreed to a different treatment of such Claim,
each holder of an Allowed Secured Tax Claim will receive, at the sole option of the
Reorganized Debtors, (a) on the later of (x) the Effective Date, and (y) the date each
Claim becomes Allowed, or as soon thereafter as is practicable, Cash in an amount equal
to the Allowed amount of such Claim, including any interest required to be paid pursuant
to Bankruptcy Code section 506(b), (b) deferred cash payments, over a period not
exceeding six years after the date of assessment of such Claim, of a value, as of the
Effective Date, equal to the allowed amount of such Claim with interest at 5% per annum,
or (c) upon such other terms determined by the Bankruptcy Court to provide the holder of
such Allowed Secured Tax Claim deferred Cash payments having a value, as of the Effective
Date, equal to the Allowed amount of such Claim.
Other Secured Claims The legal, equitable and contractual rights of the holders of Allowed Other Secured
Claims are unaltered by the Plan. Unless the holder of such a Claim has agreed to
different treatment of such Claim, on the Effective Date, or as soon thereafter as
reasonably practicable, each Allowed Other Secured Claim will be, at the option of the
Debtors, (i) assumed, (ii) reinstated, or (iii) the underlying collateral will be
surrendered.
Leucadia Prepetition Claims $25 million New Senior Note and 100% of the shares of New Common Stock (Note: The New
Common Stock issued to Leucadia will be subject to dilution of up to 15% by stock issued
under the New Management Restricted Stock Plan.)
Customer Claims The rights of each holder of an Allowed Customer Claim with respect to deposits or credit
balances it may hold shall be satisfied between the parties in the ordinary course of the
Reorganized Debtors' businesses. The Reorganized Debtors assume all obligations for all
Customer Claims according to their original terms.
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Convenience Claims Each holder of an Allowed Convenience Claim shall receive 15% of such Claim in Cash on
the Effective Date, or as soon thereafter as is practicable.
General Unsecured Claims Each holder of an Allowed General Unsecured Claim, excluding SBC and Verizon (to the
extent provided by the Verizon Settlement Agreement), shall receive its Pro Rata share of
$7.0 million in Cash, plus such amount, if any, added to that amount pursuant to Section
6.20 of the Plan. (Note: The $7.0 million Cash amount shall be funded on the Effective
Date of the Plan and held in a segregated, interest bearing escrow account for
distribution to holders of Allowed Class 7 Claims in accordance with the distribution
provisions of this Plan.)
Section 510(b) and Other Holders of Section 510(b) and Other Subordinated Claims shall not receive any
Subordinated Claims distributions on account of such Claims and shall not receive or retain any property
under the Plan on account of such Section 510(b) Claims.
Old Common Stock Interests Holders of Old Common Stock Interests and Other Equity Interests in ATX shall not receive
and Other Equity Interests any distributions under the Plan on account of such Old Common Stock Interests and Other
in ATX Equity Interests in ATX. All Old Common Stock Interests and Other Equity Interests in
ATX will be deemed extinguished as of the Effective Date.
Equity Interests Securities Holders of Equity Interests Securities Litigation Claims shall not receive any
Litigation Claims distributions on account of such Claims and shall not receive or retain any property
under the Plan.
SECTION 9 - FINANCIAL STATEMENTS AND EXHIBITS
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(c) EXHIBITS.
EXHIBIT NO. DESCRIPTION
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2.1 Debtors' Modified Second Amended Joint Plan of Reorganization
Under Chapter 11 of the Bankruptcy Code, dated as of April 13,
2005
99.1 Consolidated Monthly Operating Report for the Period from
February 1, 2005 to February 28, 2005
99.2 Press Release of the Company, dated April 14, 2005
Cautionary Statement Regarding Forward Looking Statements
This document contains certain forward-looking statements that
involve substantial risks and uncertainties. All statements regarding the
Company's expected future financial position, results of operations, cash flows,
restructuring and financing plans, business strategy, budgets, projected costs,
capital expenditures, competitive positions, growth opportunities, plans and
objectives of management for future operations and statements that include words
such as "anticipate," "if," "believe," "plan," "estimate," "expect," "intend,"
"may," "could," "should," "will," and other similar expressions are
forward-looking statements.
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Such forward-looking statements are inherently uncertain, and readers must
recognize that actual results may differ from the Company's expectations.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: April 20, 2005 ATX COMMUNICATIONS, INC.
(Registrant)
By: /s/ Neil Peritz
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Name: Neil Peritz
Title: Chief Accounting Officer
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
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2.1 Debtors' Modified Second Amended Joint Plan of Reorganization
Under Chapter 11 of the Bankruptcy Code, dated as of April 13,
2005
99.1 Consolidated Monthly Operating Report for the Period from
February 1, 2005 to February 28, 2005
99.2 Press Release of the Company, dated April 14, 2005