Downfall of a black syndication Kingpin: driven into bankruptcy, The Heritage Networks struggles to regain its footing without ex-CEO Frank Mercado-Valdes

Black Enterprise, April, 2005 by Dahna M. Chandler, Derek T. Dingle, Alan Hughes

The turnaround plan called for a reorganization under a new Delaware C limited liability company, Heritage Media Group, and contains plans to restore the ailing company to profitability within 18 months after the court confirms its formal reorganization plan. In Delaware, a corporation can be established with no minimum capital contribution and can qualify to do business in any state in the U.S. and in most countries around the world. Heritage Media Group, which is co-owned by Walker, will acquire THN for some $6 million. The acquisition, which has been approved by the court, ensures that THN remains black-controlled.

Under the original plan, Mercado-Valdes would have stayed on with the new corporation as a media consultant. He'd have no equity interest but would earn a salary of $8,000 a month. Since the onset of its bankruptcy problems, THN has submitted more than three versions of its restructuring plan and three or more amended plans of reorganization. After its last reorganization plan was denied, THN announced that Mercado-Valdes would no longer be affiliated in any way with the new corporation and no longer has any equity interest. It also announced that it could raise $10 million in financing from First Bank of Tennessee. THN stated that it needed to have at least $3.6 million in financing, and an additional $2.7 million to repay creditors, in order to exit bankruptcy.

"The new Heritage has emerged without the substantial albatross of that trade debt and can refocus its energy on its core business, which is advertising sales and distribution, with original productions being reduced substantially," says Wiley, adding that the company emerged from bankruptcy on Jan. 3.

With the worst of THN's problems possibly behind them, the former board chairman says Mercado-Valdes didn't have bad intentions but made questionable business decisions: "He was operating like a loose cannon, really. I think the boy had good intentions," Cottrell says. "I think he was way over his head and did not seek the proper legal advice."

--Additional reporting by Derek T. Dingle and Alan Hughes