Ziff Davis, the troubled trade media company which sold off its enterprise division last year, is now close to filing for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York, we have learned. The company has not been able to come to an agreement with its bond holders, and stopped paying interest on its debt several months ago (announced in August). Of course this mean the PE firm and owner Willis Stein will take a big hit, which bought Ziff Davis in 1999 for about $780 million. Willis Stein now owns 85.6 percent and DLJ Merchant Banking Partners own 14.4 percent. Both of them will lose control with this reorg.
The company now has brands such as PCMag, 1Up (on the gaming side), ExtremeTech and on the event side runs the big DigitalLife show.
Updated: The company has issued the official release after my barrages on them since this morning for a comment: “The company has reached an agreement with an ad hoc group of holders of more than 80% in principal amount of its Senior Secured Floating Rate Notes on the terms of a restructuring to reduce substantially the Company’s funded indebtedness.” Also, the company has a pre-arranged plan of reorg that it will file with the court and seek its approval.
On the actual bankruptcy filing, it said: “Ziff Davis also announced that, despite good faith negotiations with certain of its subordinated unsecured noteholders, the Company has been unable to reach a consensual agreement with such holders. The Company intends to work with its constituencies, including its subordinated unsecured noteholders, throughout the Chapter 11 process.”
The company of course will continue to function during this process. The ad hoc noteholder group has agreed to set aside up to $24.5 million to fund the company’s operations during the Chapter 11 case as well as after the company re-emerges, it said. The company has asked the Court for permission to continue paying employee wages and salaries and to provide employee benefits without interruption, it said. Additionally, during the restructuring process, vendors and business partners should expect to be paid.
Some more financial details on ho it will restructure: “In addition, the restructuring, if approved by the Court, will result in a substantial de-leveraging of the Company’s balance sheet. Specifically, $225 million (principal amount) of senior secured indebtedness (including the Senior Secured Notes) will be exchanged for a new $57.5 million (maximum face amount) senior secured note and at least 88.8% of the common stock in the reorganized Company. The restructuring provides for 11.2% of the reorganized Company’s common stock to be distributed to holders of the Company’s subordinated unsecured notes if the class of such holders votes to accept the restructuring. Holders of the Company’s subordinated, unsecured notes have not yet agreed on the restructuring: however, the Company believes the restructuring plan can be approved by the Court without their agreement.”
The full release is here.
