As Vice Media, the brash company that once had ambitions of replacing legacy news giants, files for bankruptcy protection, with $834 million in debt obligations, its finances are coming into focus.
While its largest creditors include Fortress Investment Group (with a $474.6 million claim), there’s several media companies that are listed as top unsecured creditors that aren’t insiders, as outlined in its filing in the United States Bankruptcy Court for Southern District of New York on Monday. The filing estimates there are more than 5,000 creditors. Given that Vice lists $350 million in assets, many creditors are likely to take a loss during Chapter 11 proceedings.
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Among them, CNN Productions is listed as having a $3,798,333 claim, HBO is listed as having a claim of $1,763,157 while A&E Networks is listed as having a claim of $937,500, per the filing. Tech firm Wipro, Amazon Web Services, ad agency Horizon Media, Greek media giant Antenna TV and photo giant Getty Images are also among creditors. The declaration also gives a window into a vast constellation of LLCs that make up Vice Media’s holdings, from its Studios and Pulse Films unit to its co-partnerships globally.
“Like many other growth companies in the media and technology sectors, VICE has been cash flow negative for the past several years,” wrote Frank A. Pometti, a consultant hired as the chief restructuring officer of Vice Media, in a declaration filing. “As a result, VICE relied on external funding, raising both debt and equity capital to fuel its rapid growth and to fund expenses in certain parts of its businesses. Although these fund-raising efforts helped to finance VICE’s growth, they ultimately led to the Company being burdened by a highly leveraged and unusually complex capital structure.”
The move caps more than a year of uncertainty for the embattled media giant, which has been led by co-CEOs Bruce Dixon and Hozefa Lokhandwala in 2023 after the departure of chief Nancy Dubuc and global president Jesse Angelo. “We will have new ownership, a simplified capital structure and the ability to operate without the legacy liabilities that have been burdening our business,” stated Dixon and Lokhandwala as the filing was announced.
Since scrapping plans for an initial public offering, Vice Media has sought multiple suitors while undergoing a series of cost-cutting measures and layoffs capped by the cancellation of its flagship show Vice News Tonight in late April. Pometti also confirmed the company “is reducing its news related workforce during May and June 2023.”
Vice hopes to emerge from the bankruptcy process in two or three months and entered into an agreement to sell itself to a consortium of buyers, including Fortress Investment Group, Soros Fund Management and Monroe Capital, for a $225 million credit bid and assumption of liabilities. In the meantime, its lenders are funding Vice with $20 million during the bankruptcy process.
The company, founded in Montreal in 1994 as an edgy and purposely offensive print magazine that changed its name to Vice two years later, has grown into a sprawling, Brooklyn-based global media conglomerate with multiple web verticals and a large video production division. Built by the salesmanship of co-founder Shane Smith, the brand unveiled Vice Broadcasting Systems TV as its initial major foray into digital video production in 2007.
But its time of rapid expansion and growth arrived a few years later. In April 2011, Vice added MTV founder Tom Freston to its board of directors, enlisted media merchant bank The Raine Group to help land deals and inked a partnership with WME to represent it in Hollywood. Smith called the partnership an “unholy alliance that will ensure no other media company will ever stand a chance against Vice’s relentless onslaught.”
The partnership kicked off a decade of rapid growth and investments from traditional media conglomerates interested in funding what was seen, through Smith’s swaggering pitch, as a company that could uniquely cater to a youth audience in an authentic way. “Who’s heard of VICE media?” Rupert Murdoch wrote on Twitter in October 2012. “Wild, interesting effort to interest millennials who don’t read or watch established media. Global success.”
In August 2013, Murdoch’s 21st Century Fox paid $70 million for a 5 percent stake in Vice, valuing the company at $1.4 billion. A year later, A&E Networks paid $250 million for a 10 percent share, valuing the company at $2.5 billion. Shortly after, venture capital fund Crossover Ventures spent $250 million for a 10 percent stake in Vice.
During the period of rapid growth, Vice scored attention-making scoops with its video efforts, including a 2013 episode of its HBO series that featured Dennis Rodman going to North Korea, cameras in tow, to play basketball with dictator Kim Jong-un. In 2015, President Obama went with Smith to a federal prison for a special centering on the criminal justice system. And Vice News Tonight had a documentary crew on the ground during the 2017 Unite the Right rally in Charlottesville, offering a closer look at the white supremacist rally than other national news organizations.
That rapid growth also came with reports of its founder’s excesses. To pick one of many examples, in February 2015, Bloomberg reported that Smith spent $300,000 on a Las Vegas “feast” at the Bellagio’s Prime Steakhouse. (A spokesperson told THR at the time that Smith won “well north of” $300,000 while playing blackjack, and those winnings were spent at the dinner.)
In November 2015, Vice unveiled plans for a major linear TV undertaking with Viceland, a cable news brand that took the place of A+E Networks’ channel H2 and would be distributed in 70 million homes. Writer-director Spike Jonze was named to oversee the production and show creation for the nascent effort.
After the Viceland plans were unveiled, Disney made two investments of $200 million each in late 2015, which valued the company above $4 billion. (Disney later wrote down investments in Vice to the tune of $157 million in 2018 and a $353 million impairment charge in 2019.) And, in what may be the zenith of its expanding valuations during the 2010s, Vice raised $450 million from private equity firm TPG in 2017 in a funding round that valued the company at $5.7 billion.
But Viceland, contrary to the vision of replacing cable news stalwarts like CNN or MTV, never took off as a linear TV channel. “Over the past decade, VICE expanded significantly, acquiring complementary businesses and breaking into new markets, resulting in the need for access to additional capital,” Pometti wrote in the declaration filing. “This rapid growth and resulting financing activity ultimately contributed to the liquidity challenges the Company has experienced over the past five years.”
Smith stepped away from the CEO role in 2018, with A+E Networks’ Dubuc taking over the top job as the media company reckoned with allegations of a toxic corporate culture. In one of Dubuc’s first major moves, Vice Media acquired digital media lifestyle publisher Refinery29 in 2019 in a bid to scale up the company’s online readership. (Vice’s flagship site saw 19.9 million visitors in March and Refinery29 reached 5.2 million visitors, per Comscore data. By the same metric, BuzzFeed reached 36.6 million visitors while Complex hit 10.5 million monthly visitors in March.)
For years, Vice executives had spoken about the company’s ambitions to go public, but IPO plans were ultimately scrapped. After exploring plans to go public via a special purpose acquisition company, or SPAC, during a frenzy of dealmaking, Vice scuttled that effort. In September 2021, Vice announced that it raised $135 million from a round of investors including James Murdoch’s Lupa Systems, TPG and TCV, as well as Sixth Street and Antenna Group.
It then began a search for buyers, which didn’t pan out. “In the spring of 2022, VICE management began working with PJT Partners LP (“PJT”) and LionTree LLC (“LionTree”) to assist it in exploring a sale that would maximize value for the benefit of creditors and other stakeholders,” Pometti recounted in the declaration filing, adding: “The Company received indications of interest from several prospects, two bids for a whole company transaction, and reached advance stages of negotiation and documentation with one of those bidders. Ultimately, despite a lengthy and protracted process, the Company was unable to conclude a transaction with any of the bidders.”
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