VICE Media LLC filed for Chapter 11 bankruptcy Monday, a process that is likely to result in the sale of the company to Fortress Investment Group and Soros Fund Management for $225 million. The news comes a few weeks after the company shuttered VICE World News and canceled VICE News Tonight, its flagship news television program, resulting in more than 100 layoffs across the newsroom. The company will continue to operate normally during the Chapter 11 process.
Chapter 11 filing documents viewed by Motherboard show that VICE Media LLC and 31 associated LLCs owe Fortress $474.6 million.
"VICE Media Group today announced that it has agreed to the terms of an asset purchase agreement with a consortium of its lenders," the company said in a press release.
The filing is the latest in a series of blows to the company, which once took funding at a $5.7 billion valuation. In 2019, the company raised $250 million in debt from investors including Fortress and George Soros's Soros Fund Management.
The Chapter 11 filing states that VICE's management "has determined that it is advisable and in the best interest of the Vice Group Companies to enter into a stalking horse agreement for the sale of substantially all assets and related auction procedures." A "stalking horse" agreement is when a potential buyer is in place in advance of a bankruptcy filing.
“This accelerated court-supervised sale process will strengthen the Company and position VICE for long-term growth, thereby safeguarding the kind of authentic journalism and content creation that makes VICE such a trusted brand for young people and such a valued partner to brands, agencies and platforms," Hozefa Lokhandwala and Bruce Dixon, VICE’s CEOs, said in a statement. "We will have new ownership, a simplified capital structure and the ability to operate without the legacy liabilities that have been burdening our business. We look forward to completing the sale process in the next two to three months and charting a healthy and successful next chapter at VICE."
VICE has taken on a series of high-profile investments at large valuations over the years. These investments allowed the company to expand, but ultimately created a list of companies expecting a return on their investment. This included private equity firm TPG, which gave the company $450 million in 2017 to expand its VICE TV offerings and expand internationally. The company has also taken high-profile investments from A&E Networks, Disney, and Fox.
These investments led to a highly complex corporate structure and series of debts that Frank Pometti of the consultancy firm AlixPartners, who has been appointed Chief Restructuring Officer of VICE, said ultimately resulted in the company's bankruptcy. In a filing with the court, Pometti wrote "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."
According to Pometti's filing, these investments left VICE highly leveraged and unable to pay its debts; this created a cascading situation where VICE had to continually push back loan repayments or get more funding to continue operations.
"In 2019 the Company raised additional capital to fund ongoing operations, non-operating expenses and liabilities and operational restructurings," Pometti wrote. "This left the Company saddled with a significant amount of leverage in the form of the 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 Petition Date."
Meanwhile, the company tried to sell itself multiple times but was never able to close a deal. It also tried to go public via a SPAC in 2021, but ultimately had to abandon that plan, Pometti wrote.
Two recent events seemed to make bankruptcy inevitable, according to Pometti's filing: In January, VICE was set to receive a quarterly $34 million payment from the parent company of Antenna, the Greek corporation that was a founding partner of VICE World News. That payment was supposed to fund VWN's operations. That payment didn't come, and, instead, VICE got a notice that said the company would terminate its VWN partnership. The VWN deal brought in $134 million in revenue in 2022, the filing stated.
The funding gap led VICE to seek advances on other loans it had in order to continue operations.
"The impact of termination of the VWN relationship on the entirety of VICE’s businesses was substantial," Pometti wrote, noting that it ultimately led to the end of VWN, VICE News Tonight, and a fundamental restructuring of the newsroom. VICE repeatedly had to ask for forbearance on its loans.
Then, earlier this month, an arbitrator determined that VICE owed an IT company called WiPro $9.9 million. WiPro sought a restraining order that temporarily froze many of VICE's bank accounts, according to Pometti: "The freeze on the Vice Media [bank] Accounts has essentially shut off much of the liquidity of the Debtors."
The Chapter 11 documents show that VICE owes money to a variety of creditors. It owes $20 million to the founders of Pulse Films, which it has worked with for years and acquired in 2022. It owes nearly $10 million to an IT consulting firm called WiPro, $3.8 million to CNN for third party production services, and at least $6 million to Antenna. It owes money to companies that provide enterprise software services to the company, including Workday, Adobe, Ranker, Getty Images, Amazon Web Services, Piano Software, Salesforce, Wolftech, Asana, and Oracle. It also owes $539,732 to ConEdison for utilities.
VICE Media was founded in 1994 and grew from a small magazine based in Montreal to a complex, international youth media conglomerate with a flagship television channel, multiple film studios businesses, a variety of digital media brands (including Motherboard), a news division with shows on HBO and Showtime, an advertising and creative agency, and, most recently, an international news division called VICE World News. Last month, roughly a week after Buzzfeed News shut down, the company announced it would end the VICE World News brand.
“We are transforming VICE News to better withstand market realities and more closely align with how and where we see our audiences engaging with our content most,” co-CEOs Bruce Dixon and Hozefa Lokhandwala said in a note to staff that was reported by The Wall Street Journal. The bankruptcy filing comes two weeks after those cuts.
In a filing with the court, VICE said: "From their humble beginnings as a niche magazine, the Debtors and their non-Debtor affiliates (collectively, “VICE”) have grown into a global media company that focuses on content centered around news and culture, serving a largely global youth audience. Today, VICE is a global, multiplatform media company that has a powerful brand, diversified financial profile, premium content, and rich engagement with its youth-targeted audience."
Jared Ellias, a professor at Harvard Law School and corporate bankruptcy expert, said that, based on publicly available reporting, VICE Media’s bankruptcy process is likely to be relatively quick because it appears to already have someone willing to buy it.
“Generally how these things tend to go is the company is going to file for bankruptcy and it will immediately seek court permission to hold an auction,” Ellias said. “And the buyer that’s out there will be what we call a stalking-horse bidder, which means that the company has agreed to sell itself to the buyer.” Ellias added that there must still be an auction process, and that during the auction process, a variety of things could happen.
“My guess is there will be an auction probably within a couple weeks of the filing. Perhaps another bidder emerges, but at the end of the auction, VICE will have a new owner, and the sale will be effectuated pretty quickly,” he added. “I’d be surprised if the whole thing lasted longer than two months.”
Previous reporting has suggested at various times that VICE Media could be sold in parts; the company has for years promoted the fact that it has a diversified business which includes VICE, VICE News, VICE TV, VICE Studios, Pulse Films, the fashion magazine i-D, and Virtue, an advertising and creative agency. VICE also owns the media brand Refinery29, which the company purchased in 2019 for a reported $400 million in a deal that was mostly stock.
VICE Media's board, and perhaps the courts, will ultimately decide which offer to accept: "The debtor owes a fiduciary duty to maximize the value of the firm for the benefit of all creditors. The debtor is, I would guess, highly likely to allow people to bid for the whole thing and then also for bits and pieces," he said. "But if the debtor's business judgment is that this thing should be sold all together, it will be very hard to imagine a group of discrete purchasers picking apart different pieces of it."
At its height, the company operated 35 offices worldwide. It has shuttered some of these over the last several years as the company has sought profitability in part through cost cutting and layoffs.
VICE says in the filing that it has assets between $500 million and $1 billion.
According to the bankruptcy documents, the restructuring will be managed by Pometti and Mark Del Priore of the consulting firm AlixPartners. Last month, Del Priore was appointed as interim CFO of the company.
Earlier this year, former CEO Nancy Dubuc left the company after a five-year run succeeding co-founder Shane Smith. In January, she told the New York Times, “When I walked in here, it was unclear whether the company could survive.” In her departing email, which was previously published by Semafor, she wrote “I am proud to leave a Vice better than the one I joined … today Vice has an incredible opportunity in the hands of a new management team who are looking to harness the businesses we built and grew and to lay the groundwork for the future.”
Disclosure: This story was reported and written, using publicly accessible filings and news reports, by Motherboard editor-in-chief Jason Koebler. It was edited by Motherboard executive editor Emanuel Maiberg. No VMG corporate or news executive reviewed this story before it was published.
Update: This article has been updated with more detail from the bankruptcy filings.