IRS Files Objection To
Source Interlink’s Reorganization Plan 0
Update to the Source Interlink’s débâcle, you remember the publisher of your favorite surfer/skater magazines.
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The Internal Revenue Service has filed an objection to Source Interlink’s plan of reorganization, claiming the magazine publisher and distributor owes more than $10 million in unpaid taxes.
The objection, filed last week in Delaware’s U.S. Bankruptcy Court, said Source’s reorganization plan cannot be confirmed because it does not ensure adequate payment of the IRS’ tax claims. The IRS said Source and its affiliates have not filed a “staggering” number of federal tax returns.
It was not immediately clear how the objection will effect Source’s emergence from bankruptcy protection. A Source spokesperson did not return a request for comment. An attorney with Source’s legal counsel, Pachulski Stang & Hutz, also did not return a request for comment.
Last month, the company, controlled by billionaire Ron Burkle‘s Yucaipa Cos., filed for Chapter 11 bankruptcy protection—saying it reached an agreement with its lenders to “eliminate approximately $1 billion dollars of existing debt” and privatize the company.
Source’s lenders also agreed to funnel $100 million in additional liquidity into the company. Source, in turn, agreed to pay “all of its vendors in full and on time.” Source said it expected to emerge from bankruptcy protection within 35 days.
The company also is seeking permission to borrow up to $385 million in post-petition financing as part of its plan to eliminate the $1 billion in debt, according to a report on Law360.com. It is said that Source owes its creditors about $733 million.
A number of other creditors have also filed objections to Source’s plan of reorganization. According to a Law360.com report, SINV LLC, one of Source’s landlords, filed an objection stating that the planned consolidation of Source’s affiliates could “hurt its claims.”
Automotive media company eVox Productions also objected to the plan, claiming, among a number of complaints, that it violates a licensing agreement it had with Source.
According to a report in the New York Post, a Source attorney said the IRS claims are current payroll taxes, not past-due back taxes.
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