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Vice Group Holding Inc. – Global Multi-Platform Media Company Files for Bankruptcy with $834.0mn of Funded Debt; Fortress Investment Group, Soros Fund Management and Monroe Capital Set to Play Stalking Horse Role ($225mn Credit Bid)

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May 15, 2023 – Vice Group Holding Inc. and 31 affiliated debtors (together “Vice Media” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the Southern District of New York, lead case No. 23-10738 (Judge TBD). The Debtors, "a global multi-platform media company," are represented by Albert Togut of Togut, Segal & Segal LLP. Further Board authorized appointments include: (i) Shearman & Sterling LLP as general bankruptcy counsel, (ii) PJT Partners Inc. and Liontree Advisors LLC as co-financial advisors and investment bankers, (iii) AlixPartners to provide Frank Pometti as chief restructuring officer and Mark Del Priore as chief financial officer, and (iv) Stretto as claims agent.

Further engagement include Gibson, Dunn & Crutcher LLP as legal counsel to the Lender Consortium, with Houlihan Lokey is serving as their financial advisor.

The Debtors’ lead petition notes between 5,000 and 10,000 creditors; estimated assets between $500.0mn and $1.0bn; and estimated liabilities between $500.0mn and $1.0bn ($834.0mn of funded debt). Documents filed with the Court list the Debtors’ three largest unsecured creditors as (i) (i) Wipro LLC ($9.9mn arbitration award claim), (ii) CNN Productions ($3.8mn third party production claim) and (iii) $3.8mn Antenna TV S.A. (consultancy services agreement claim).

In a press release announcing the filing, the Vice Media stated that it: “has agreed to the terms of an asset purchase agreement ('APA') with a consortium of its lenders (the 'Lender Consortium'), pursuant to which the Lender Consortium has agreed to purchase the Company, subject to higher and better bids from other parties and to the terms of the APA. The Lender Consortium includes Fortress Investment Group, Soros Fund Management and Monroe Capital, and has agreed to provide total purchase consideration of approximately $225 million in the form of a credit bid for substantially all of the Company's assets, in addition to the assumption of significant liabilities upon closing.

All of VICE's multi-platform media brands, including VICE, VICE News, VICE TV, VICE Studios, Pulse Films, Virtue, Refinery29 and i-D, will continue to produce and deliver award-winning content across platforms. Substantially all of the company's international entities, and the VICE TV joint venture with A&E, are not part of the Chapter 11 filing."

Bruce Dixon and Hozefa Lokhandwala, VICE's Co-Chief Executive Officers, commented: "This accelerated court-supervised sale process will strengthen the Company and position VICE for long-term growth…We will have new ownership, a simplified capital structure and the ability to operate without the legacy liabilities that have been burdening our business. We look forward to completing the sale process in the next two to three months and charting a healthy and successful next chapter at VICE."

Events Leading to the Chapter 11 Filing

In a declaration in support of first day filings (the “Pometti Declaration), Frank Pometti, the Debtors’ chief restructuring officer, commented: “In 2017, following the issuance of significant amounts of Preferred Stock, the Company invested significant capital in content, operations and infrastructure that did not provide an immediate return and resulted in significant losses and increased expenses. In 2019 the Company raised additional capital to fund ongoing operations,
non-operating expenses and liabilities and operational restructurings. This left the Company saddled with a significant amount of leverage in the form of the Prepetition Senior Secured Term Loans, Senior Subordinated Notes and Preferred Stock.

Complicating the Company’s financial situation was the fact that it did not generate sufficient free cash flow to pay its debts and continued to operate at a loss for several years prior to the Petition Date.

 Compounding those issues, the Company found itself confronting the maturity of the Prepetition Senior Secured Term Loans and Senior Subordinated Notes
in 2022, while continuing to deal with the headwinds resulting from the COVID-19 pandemic and resulting macro-economic forces
(that were aggravated by the war in the Ukraine), which together impacted the Company’s revenues, from, among other things, a contraction of advertising spending across the market since 2020. The Company’s lack of free cash flow and liquidity profile became particularly acute when GMNC failed to make the Q1 VWN Payment in January 2023 and then terminated the VWN MSA.

The media industry is subject to rapid and frequent changes in technology, evolving customer preferences and the frequent introduction of new content and features. Indeed, in the relatively short time since VICE was founded in 1994, the print and digital media landscapes have evolved enormously. Although VICE has worked
hard to be at the forefront of that evolution, the cost of investing to develop new technologies is significant.

In recent years, VICE’s revenue generation operations, cash flows, and financial position were negatively impacted by the overall decline in advertising markets,
and further hampered by challenges in monetizing news and cultural content programmatically due to platform imposed filters. Additionally, the COVID-19 outbreak
and the start of the conflict in Ukraine disrupted certain production activities and resulted in delays, postponements, or cancellations of certain revenue sources
…. In the face of market headwinds, over the last two years the Company continued to raise capital for continued operations and investments, while management implemented a series of additional cost-saving actions intended to improve profitability.

Ultimately, the business challenges confronting VICE, the complexity of the Company’s governance [see structure chart below] and capital structure, and the rapid deterioration of the debt and equity capital markets severely constrained VICE’s access to new capital and impeded the Company’s strategic efforts to find an adequate solution.

…in the final days leading up to these Chapter 11 Cases, Wipro LLC (“Wipro”) obtained a judgment against Vice Media LLC in the amount of approximately $9.9 million. Wipro obtained such judgment on May 4, 2023, and on May 5, 2023, Wipro commenced the process of enforcing its judgment through the purported service of a restraining notice under CPLR § 5222(b) (the 'Restraining Notice'), limiting the ability of Vice Media to transfer or dispose of its assets, including its cash on hand."

DIP Financing

The Debtors' filig date press release notes: "VICE has also obtained commitments for debtor-in-possession ('DIP') financing from the Lender Consortium, as well as consent to use more than $20 million of cash that constitutes the cash collateral of the Lender Consortium. VICE anticipates that this financing, as well as the cash generated from ongoing operations, will be more than sufficient to fund its business throughout the sale process, which it expects to conclude in the next two to three months." Documents filed with the Court note that the DIP financing will be comprised of $10.0mn of new money ($5.0mn interim) and a $50.0mn roll-up of prepetition debt (half with interim order and half with final). Interest is at SOFR plus 12.0%with fees to include a PIK-ing commitment fee of 10% on new money loans
(earned upon entry of the interim DIP order) and a PIK-ing 6% exit fee (again on the new money loans).

Prepetition Indebtedness

At filing, the Debtors had approximately $834.0mn of obligations under the Debtors funded debt issued or guaranteed by the Debtors (the “Funded Debt Obligations”). The Funded Debt Obligations comprise the following:

FN4 The JPM Overdraft Facility is denominated in British pounds sterling. The U.S. dollar amounts set forth in this table represent and approximation based upon the conversions of GBP to USD.

Prepetition Shareholders

About the Debtors

According to the Debtors: “VICE Media Group is a global multi-platform media company. Launched in 1994, VICE has offices across multiple countries and a focus on five key businesses: VICE.com, an award-winning international network of digital content; VICE Studios, a feature film and television production studio; VICE TV, an Emmy-winning international television network; a Peabody award-winning News division with the most Emmy awarded nightly news broadcast; and Virtue, a global, full-service creative agency. VICE Media Group's portfolio includes Refinery29, the leading global media and entertainment company focused on women; Pulse Films, a London-based next-generation production studio with an office in Los Angeles; and i-D, a global digital and quarterly magazine defining fashion and contemporary culture and design.“

Corporate Structure Chart (see Docket No. 3 for better resolution)

 

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The post Vice Group Holding Inc. – Global Multi-Platform Media Company Files for Bankruptcy with $834.0mn of Funded Debt; Fortress Investment Group, Soros Fund Management and Monroe Capital Set to Play Stalking Horse Role ($225mn Credit Bid) appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.


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