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June 29, 2023 – iMedia Brands, Inc. and 11 affiliated debtors (Nasdaq: IMBI*; together “iMedia” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the District of Delaware, lead case No. 23-10852 (Judge TBD). The Debtors, a global media company capitalizing on the convergence of entertainment, ecommerce, and advertising," are represented by Laura Davis Jones of Pachulski Stang Ziehl & Jones LLP. Further Board authorized appointments include: (i) Ropes & Gray LLP as general bankruptcy counsel, (ii) Huron Consulting Services LLC ("Huron") as financial advisor (and providing a Chief Transformation Officer), (iii) Lincoln Partners Advisors LLC as investment bankers and (iv) Stretto as claims agent.
* Failure to file either of their latest 10-Q or 10-K on time has resulted in letters from Nasdaq as to the breach of Nasdaq's listing rules.
The Debtors’ lead petition notes between 1,000 and 5,000 creditors; estimated assets between $100.0mn and $500.0mn; and estimated liabilities between $100.0mn and $500.0mn (funded debt of $129.7mn; NB: the Debtors further provide that as of April 29, 2023 total assets were $272.6mn and total liabilities were $373.7mn). Documents filed with the Court list the Debtors’ three largest unsecured creditors as (i) US Bank, NA (as Trustee for $81.7mn 8.5% Senior Unsecured Notes due 2026), (ii) AT&T ($19.9mn trade claim) and (iii) WRNN-TV Associates ($10.4mn trade claim). In total, the Debtors estimate @$130.4m "in accounts payable outstanding before application of any setoffs, credits, or deductions…").
Petition Date Highlights
- Eden Prairie, MN based "Global Media Company" Files for Bankruptcy with Funded Debt of $129.7mn and Trade Debt of $130.4mn
- Debtors, Coming Off Of COVID-Driven Home Shopping Bump, Cite Recent Inflationary Pressures and Changing Consumer Habits (ie Lower Home Spending)
- Debtors Expect to Finalize Terms as to a Proposed Going Concern Sale Transaction "In the Very Near Term"
- Debtors Have Not Requested Court Authority for DIP Financing
Goals of the Chapter 11 Filing
The Alt Declaration (defined below) provides: "…the Debtors, with the assistance of Lincoln, their investment banker, have been actively seeking to develop strategic alternatives, including by soliciting bids for some or all of the Debtors’ assets. The Debtors are in fact actively engaged with a potential acquirer for their operations as a going concern. With the assistance of their advisors, the Debtors are actively working to finalize that proposed transaction in the very near term. However, the Debtors ultimately determined that commencing these chapter 11 cases would be a prudent step to facilitate these efforts by, among other things, allowing the Debtors to obtain the ‘breathing spell’ as they work to finalize a value-maximizing transaction for their stakeholders."
Events Leading to the Chapter 11 Filing
In a declaration in support of first day filings (the “Alt Declaration) [Docket No. 17], James Alt, the Debtors’ Chief Transformation Officer commented: “Prior to the commencement of these chapter 11 cases, the Debtors faced substantial macro challenges due to a confluence of factors driven primarily by post-pandemic changes in the spending behavior of consumers, inflationary pressures on goods and labor, high content distribution costs, and continued erosion in household subscribers in the U.S. cable and television market. This combination of factors, together with reduced availability under the Debtors’ prepetition asset-based lending facility beginning in December 2022, have caused the Debtors to face substantial business challenges…
In fiscal 2021, after consecutive years of declining revenue, the Company benefited from a growth in revenue as a result of the COVID-19 pandemic, which led to an increase in home shopping activity. Over the past two years, however, the Debtors believe that inflationary pressures have altered consumer behaviors and reduced discretionary at home spending. Reduced revenues resulted in significant financial losses in the Debtors’ entertainment business segment, which typically accounts for the Company’s largest revenue stream. The Company suffered an operating loss of $41.4 million for the entertainment segment for the nine months ending"September 30, 2022, compared to an $11.6 million operating loss during the same time period in 2021. The Debtors have continued to experience significant sales declines into 2023 on a year-over-year basis which have reduced receipts and, by extension, operating cashflow.
The Debtors’ operational challenges have significantly impacted their liquidity position. In particular, declining revenues and cash from operations have, in turn, exacerbated the Debtors’ liquidity challenges. Declining availability under Prepetition ABL Agreement has also impacted the Debtors’ ability to replenish inventory, which impacts revenues as a result. As the Debtors’ operating position has deteriorated, the Debtors have received several notices of default in connection with key vendor agreements and leases, and several related litigation proceedings have been commenced against the Debtors."
As of the Petition date, the Debtors have approximately $129.7mn of funded principal debt and interest obligations, consisting of obligations under: (i) the Prepetition ABL Facility; (ii) the Synacor Seller Note; (iii) the Senior Unsecured Notes; (iv) the Growth Capital Partners Note; (v) the PIPE Notes; and (vi) the guaranty by iMedia of the obligations of its wholly-owned Germany subsidiary under the 123TV Seller Note (each as defined in the Alt Declaration).
The following table summarizes the Debtors’ prepetition capital structure (as of the Petition date) with respect to funded debt, inclusive of accrued but unpaid interest and fees:
FN4 This balance includes an asserted “Early Termination Fee” totaling approximately $1.6mn and various fees and expenses charged to the loan balance totaling approximately $1.5mn.
As of the Petition date, the Debtors estimate they have @$130.4mn in accounts payable outstanding before application of any setoffs, credits, or deductions that may be available to the Debtors.
First day filings include a cash collateral motion, but there are no references (or requested authorities) relating to DIP financing in Petition date filings.
Key Prepetition Shareholders
- Invicta Media Investments, LLC: 6.98%
About the Debtors
According to the Debtors: “iMedia Brands, Inc. (Nasdaq: IMBI, IMBIL) a global media company capitalizing on the convergence of entertainment, ecommerce, and advertising. The Company owns and operates four television networks, which are ShopHQ, ShopBulldogTV, ShopHQHealth and 123tv. ShopHQ, the company’s flagship television network with a thirty-year history, is nationally distributed in the U.S. to over 90 million homes via its affiliation agreements in cable, satellite, and broadcast, and reach viewers through its social platforms and its OTT App on Roku, Apple TV, Amazon Fire and Samsung Smart-televisions.
iMedia’s common stock is traded on the Nasdaq Global Market stock exchange under the ticker IMBI. iMedia’s 8.5% bonds are also publicly traded on the Nasdaq Global Market under the ticker IMBIL.“
The Alt Declaration adds: "The Debtors are a leading interactive media company that capitalizes on the convergence of entertainment, ecommerce, and advertising. The Debtors employ approximately 600 men and women as of the Petition Date, and together with their non-Debtor affiliates, employ approximately 700 individuals worldwide. The Debtors’ U.S.-based employees are located primarily in Eden Prairie, Minnesota (the location of the Debtors’ corporate headquarters and broadcasting center), and in Bowling Green, Kentucky (the location of the Debtors’ principal distribution facility).
The Company owns and operates a portfolio of entertainment, consumer brands, and media commerce businesses, each of which cross promotes and exchanges data with each other to optimize the engagement experiences it creates for advertisers and consumers in the United States and Western Europe. The Company’s portfolio includes, among other things, entertainment business segments ShopHQ (the Company’s flagship shopping network) and 1-2-3.tv (a leading German interactive media company),2 consumer brands Christopher & Banks and J.W. Hulme Company, and media commerce business iMedia Digital Services.
Corporate Structure Chart
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