Vice’s Bankruptcy Filing Was Inevitable – and Still Managed to Surprise | Analysis
Vice was the quintessential digital media business, if by “quintessential digital media business” you mean an elaborate project that involved taking money from investors, paying journalists and leaving everyone poorer, as the media group’s bankruptcy filings revealed.
The company owes a lot of people money, starting with a consortium led by Fortress Investment Group, which plans to buy Vice after it goes through a prepackaged bankruptcy process. Vice owes the Fortress group approximately $475 million. The consortium has agreed to pay another $225 million for Vice, whose brands include Vice News, Refinery29, the Virtue advertising studio and i-D magazine.
Investors and other shareholders, who gave Vice $1.6 billion over the years and valued Vice at a peak of $5.7 billion in 2017, aren’t likely to see anything. Some had quite literally written off Vice years ago: Disney declared its $400 million investment in the company, made in the middle of the past decade, worthless in 2019.
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The asset purchase agreement Vice struck with the consortium is a typical maneuver meant to speed a company through bankruptcy court and out the other side as a viable concern. It suggests confidence on Fortress’ part that it can either extract value from selling off the venture, in whole or in parts, or by operating the company, unburdened of most of its debt, to generate cash.
There is little to suggest that Vice has much promise of the latter. As AlixPartners’ Frank Pometti, who’s overseeing Vice’s restructuring, wrote in a declaration supporting the bankruptcy petition, the essential problem that got Vice to bankruptcy is that it hadn’t made money in years and so couldn’t generate cash to pay off past debts it accrued.
Instead, it continuously attempted to raise new funds to support its business, encumbering itself along the way with an increasingly complex structure that made it difficult to pay its obligations as money got tighter and tighter. (Vice even had a separate entity called “Vice Payroll LLC,” to give an idea of the organization’s complexity.)
That ponderous edifice was teetering for years, particularly after Vice tried and failed to go public through a SPAC merger in 2021. But two particular events this year seem to have pushed it over the edge into seeking bankruptcy protection, Pometti’s declaration indicated. First, a longtime partner, Antenna Group, failed to make a quarterly payment of $34 million in mid-January under a long-running deal to license Vice World News in Europe. After delays, Antenna instead sent a notice of termination. That deal was supposed to run through 2024, according to a 2019 announcement of its renewal.
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Separately, Wipro, an IT consultancy, won a judgment in March against Vice for $9.9 million for a disputed payment dating back to 2020. Wipro began attempts to enforce the judgment, enjoining Vice’s bank accounts with JPMorgan Chase.
Bankruptcy isn’t a death sentence, particularly the Chapter 11 filing sought by Vice. Instead, it’s part of the legal system meant to give a troubled business breathing room to pay creditors in an orderly fashion and preserve jobs. But it’s not clear what kind of business will emerge from this attempt at reorganization.
One tell-tale sign of the trouble: The now-terminated Vice World News deal was worth $134 million a year, “a significant source of stable and profitable revenue,” Pometti wrote in his declaration. It wasn’t as good a business for Vice’s partner, Antenna, which described itself and Vice as having built “an eight-figure business in the region.” An eight-figure business which cost nine figures a year isn’t a stable foundation for anything.
“Numbers fluctuate,” then-newly appointed Vice CEO Nancy Dubuc wrote in a memo to her staff in May 2018. Mostly the numbers went down as she struggled to right an already debt-laden ship. She announced her departure in February, just nine days after Vice received the cancellation notice from Antenna.
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