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VIce Media had been built on a wobbly house of financial cards for years, but the final blow that sent the company into bankruptcy came when one of its foreign partners failed to make a key payment at the beginning of the year.
The partner, Greece’s Antenna Group, had been engaged for months in talks to buy the struggling Brooklyn-based media company, but in early January didn’t send a much-needed $34 million quarterly check as part of a long-standing content licensing deal.
The following month, Antenna said it was terminating its $130 million-a-year arrangement, plunging Vice into financial turmoil at a time when it had already begun defaulting on its debt payments, according to filings made in bankruptcy court.
The months-long sales talks with Antenna stalled late last year as Vice missed certain revenue targets, but why Antenna walked away from the long-standing content deal wasn’t entirely clear. A spokesman for Antenna had no immediate comment.
The missed payment in January sent Vice on a mad scramble for cash just to keep the lights on, marking a dramatic swing in fortune for the once ballyhooed digital media darling that had been valued at as much as $5.7 billion just over five years ago.
But the terms of the $450 million investment from private equity firm TPG in 2017 that earned Vice that eye-popping valuation, plus subsequent debt rounds, proved ultimately to be crushing as the company struggled to grow.
On Monday, Vice Media filed for Chapter 11 bankruptcy protection, and announced it had reached an arrangement with its biggest creditors, Fortress Investment Group, Soros Fund Management and Monroe Capital, to acquire the media company out of bankruptcy for $225 million unless a higher bid emerges. Vice it will continue to operate as normal until the sale.
In February, Vice reached a deal with Fortress for a $30 million loan in order to cover Vice’s bills, plus an agreement to push back its repayment schedule for $250 million in loans it had taken in 2019 from a consortium led by the private equity firm, that had come due in December, the court filings showed.
But the contract termination by Antenna a month later proved too much to paper over, with Vice struggling to find new overseas contracts to fill the gaping hole in its ledger sheet.
A deal announced in late January with Saudi Arabia’s MBC Group to produce Arabic-language content — coming after years of media companies keeping their distance from the country following the murder in 2018 of Washington Post journalist Jamal Khashoggi — proved to not be enough.
In late April, Vice announced it would have to lay off dozens of newsroom employees and shut down its flagship “Vice News Tonight,” program.
In early May, IT service provider Wipro LLC won a $9.9 million judgment against Vice for unpaid bills. As part of that ruling, Wipro pressed JP Morgan Chase to freeze Vice’s accounts at the bank until the payments were made, the court filings showed.
Vice’ bankruptcy comes amid a broader reckoning for digital media companies that rose to success through a venture capital boom in the space starting about a decade ago.
Others, like BuzzFeed and Vox Media, also have struggled to meet the growth expectations venture capitalists crave. Last month, BuzzFeed
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announced it was shutting down its BuzzFeed News division following a disappointing IPO in late 2021 through a special purpose acquisition company. In February, Vox raised $100 million in a funding round that valued the company at just half of the $1 billion valuation it earned at its peak in 2015.
Ultimately, the push at Vice to justify its $5.7 billion valuation in 2017 contributed to its undoing.
The terms of Vice’s deal with TPG granted the private equity firm highly preferred shares that came with high dividend payments that were due to begin in 2020. The money raised in that round helped Vice expand its operations greatly as it launched its own TV channel, Viceland, through a partnership with A&E.
But as the 2020 dividend payments approached, Vice had failed to significantly increase its revenues and was losing money, bankruptcy court filings showed. In 2019, it reached the debt agreement with the Fortress consortium, as well as an agreement with TPG to not have to pay its cash dividend, but rather hand them IOUs with high rates of interest.
That interest ultimately ballooned what Vice owed to TPG by over $100 million over the next three years.
In its filing, Vice says it has debt totaling $834 million — about half of which is owed to Fortress and its partners as senior secured notes, and another $328 million owed to TPG in deferred dividend payments.
