ION rejects $250 mln offer from Cyrus - sources

By Emily Chasan

NEW YORK, Nov 12 (Reuters) - Bankrupt U.S. television station owner ION Media Networks (IION.PK) has formally rejected a $250 million offer to take control of the reorganized company from creditor Cyrus Capital Partners, according to people familiar with the matter.

ION is expected to ask U.S. bankruptcy Judge James Peck for approval of its own bankruptcy reorganization plan at a hearing later on Thursday.

In a letter to the company's board of directors dated Nov. 9, Cyrus Capital Partners, which owns some of the company's second lien debt, said that rather than going ahead with ION's current reorganization plan, it would offer to refinance ION's existing debtor-in-possession bankruptcy loan for $250 million in exchange for 62.5 percent of equity in the reorganized company. [ID:nN12415358]

The proposed deal would have left the company with access to millions more in funding than its current reorganization plan, allowed it to exit bankruptcy immediately, and let it out of litigation with Cyrus.

ION rejected the offer largely on procedural reasons, these people said. They asked not to be named because the rejection of the offer was not yet public.

The case is In re: ION Media Holdings Inc, U.S. Bankruptcy Court, Southern District of New York, No. 09-13168. (Reporting by Emily Chasan, editing by Matthew Lewis)