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May 30 (Bloomberg) -- Nebraska Book Co., the operator of a chain of college bookstores, won court approval of a restructuring plan that eliminates about $270 million in debt.

U.S. Bankruptcy Judge Peter Walsh approved the company’s reorganization plan at a hearing today in Wilmington, Delaware, saying he would sign the order once it’s finalized.

“When we appeared before you some 11 months ago we were hoping for a brief sojourn” in bankruptcy, Marc Kieselstein, a lawyer for the company, told Walsh. It became clear in late 2011 that a deeper restructuring was necessary, he said.

Nebraska Book sought bankruptcy protection last June with a pre-arranged plan to exit court protection within a few months. That plan unraveled after credit markets tightened and the company was unable to obtain $250 million in exit financing.

Under the new plan, senior secured noteholders owed about $200 million will get virtually all of the reorganized company’s equity, plus $100 million in new notes and the right to participate in an $80 million exit loan. The noteholders are projected to recoup about 81 cents on the dollar.

Holders of 8.625 percent unsecured notes, owed about $179 million, will get warrants for 22 percent of the new equity, to recover about 3 cents on the dollar. They were to receive most of the equity under the previous plan.

Unsecured Creditors

Unsecured creditors, owed from $11 million to $14 million, will get a cash payment for a recovery of about 4 percent. The company, based in Lincoln, Nebraska, had about $508.3 million in assets and about $547.7 million in debt as of March 31, 2011, according to court papers.

The company was forced to seek bankruptcy after “several years of declining or stagnant levels of profitability,” according to court papers. Nebraska Book, founded in 1915 with a single bookstore near the University of Nebraska campus, had about 290 stores when it began reorganizing. It closed 45 off-campus bookstores.

The case is In re Nebraska Book Co., 11-12005, U.S. Bankruptcy Court, District of Delaware (Wilmington).

To contact the reporter on this story: Michael Bathon in Wilmington, Delaware, at

To contact the editor responsible for this story: John Pickering at

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