Vice finally filed for bankruptcy yesterday, and with it we have a statement from its restructuring manager Franco Pomettihired by AlixPartners to oversee the hulk of the media empire more hipper than you.
Sadly the CRO statement is not quite FTX-style”lol this is the craziest thing i have ever seenbut it doesn’t paint a favorable light for a company once valued at nearly $6 billion in the era of zero rates.
Basically, the company was a very hip, very fun, very elaborate money incinerator, according to Pometti storage.
Like many other growing media and technology companies, VICE has had negative cash flow in recent years. As a result, VICE has relied on external financing, raising debt and equity capital to fuel its rapid growth and finance expenses in parts of its businesses. While these fundraising efforts helped finance VICE’s growth, they ultimately resulted in the company being saddled with an unusually complex and highly leveraged capital structure.
As current market dynamics tended against debtors, the substantial funded debt obligations, dividend requirements on its various classes of preferred stock, and other non-operating obligations and expenses severely limited liquidity and interfered with VICE’s ability to raise additional capital. Lack of liquidity has been particularly problematic for VICE, given ongoing capital requirements resulting from the fact that most of its businesses operate on platforms that require near-constant innovation and adaptation to new technologies and content development that requires investment initial and often takes multiple years to generate returns.
Promise later provides a few more details. Vice’s sins appear to date back to at least the 2017 funding round, when it raised $450 million from the likes of TPG at a frankly mental-even-at-the-time Valuation of $5.7 billion.
The money was raised mostly through preferred stock that paid fixed dividends, but it was simply pumped to finance growth that never really materialized. As a result, Vice struggled for years to generate profits to meet its financial obligations before succumbing to bankruptcy.
As Vice’s CRO puts it, with our emphasis:
In 2017, following the issuance of significant amounts of preferred stock, the 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 has left the Company saddled with a significant amount of leverage in the form of 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 Application Date.
By 2022, Vice was raising money from its investors at an almost monthly clip. Which must have been fun for the company’s CFO and shareholders.
Starting from the first months of 2022, to address cash shortages, the Deputy Parent Company has issued various series of unsecured subordinated bonds, as issuer, to Senior Preferred Owners, as purchasers (the “Subsequent Subordinated Notes” and , together with the Initial Subordinated Notes, the “Senior Subordinated Notes”). The Subsequent Subordinated Notes were issued in various series, respectively dated February 25, 2022, April 29, 2022, May 27, 2022, June 14, 2022, August 2, 2022, August 12, 2022, August 26, 2022, September 29, 2022, September 13, 2022, 2 November 2022 and November 14, 2022.
Anyway read the full archiving if you want more details on how Vice desperately searched for a buyer and how the bankruptcy finally happened, or just want to take a look at org charts like this one:
—————————————————-
Source link