Gawker Media, which filed for Chapter 11 bankruptcy protection at the beginning of the summer, has been bough by Univision for an estimated $135 million.
$140 Million to Hulk Hogan
In June, Gawker Media filed for Chapter 11 bankruptcy protection as a result of being ordered to pay roughly $140 million to Hulk Hogan.
Hulk Hogan, real name Terry Bollea, sued Gawker for damages and violating his privacy for $100 million after the site posted a video in 2012 of him having sex with his former best friend’s wife. A Florida jury awarded Hogan $55 million for economic injuries and another $65 million for emotional distress. Additionally, Gawker has been ordered to pay $25 million in punitive damages.
Gawker has continued operations during the bankruptcy proceedings. And according to Quantcast, traffic to Gawker Media sites has increased since the bankruptcy filing. In April, the sites had about 92 million global monthly unique visitors, and in July the sites had about 104 million monthly global unique visitors.
While it was assumed that the company would be bought by Ziff Davis, the digital publisher of AskMen, _PCMag _and Computer Shopper, it appears that Univision’s offer of $135 million beat out Ziff Davis’ initial $100 million. Univision will now aquire all of Gawker Media’s brands, including Jezebel, Gizmodo, and Deadspin.
The Univision sale was approved mid-August and shortly after, Nick Denton, on of the founers sent a memo to staff addressing the decision.
Sadly, neither I nor Gawker.com, the buccaneering flagship of the group I built with my colleagues, are coming along for this next stage," Denton said. “Desirable though the other properties are, we have not been able to find a single media company or investor willing also to take on Gawker.com.
Hogan is Largest Creditor
Hogan was listed as the company’s largest creditor in its bankruptcy filing among other creditors including the following: law firm Morrison Cohen; insurance brokerage Risk Strategies; content-distribution firm SimpleReach; and Google.
Hogan Backed by Billionaire Peter Thiel
The case took an interesting turn when it was revealed that Hogan was backed by billionaire and co-founder of PayPal, Peter Thiel. Thiel recently admitted to backing Hogan’s lawsuit with $10 million because, as he told The New York Times, the site was “getting attention by bullying people even when there was no connection with the public interest.”
Following Gawker’s bankruptcy announcement, Hogan tweeted: “What a beautiful day, and the good doesn’t prevent the better! In the present I AM always grateful, only good happens to me.”
The fact that Gawker filed for Chapter 11 comes as no surprise. It’s not uncommon for large companies and even celebrities like 50 Cent to file for bankruptcy protection following court orders demanding large amounts of money.
The Chapter 11 Bankruptcy Filing Process
The Chapter 11 bankruptcy process begins with the filing of a petition in bankruptcy court. Typically the debtor in these cases are corporations, partnerships, and limited liability companies. It should be noted that individuals are able to file Chapter 11 if they have too much debt or income to be able to qualify to file for Chapters 7 and 13.
While Chapter 11 is usually voluntary, sometimes creditors will file an involuntary Chapter 11 against a defaulting debtor.
Typically a debtor will file Chapter 11 where their primary place of business is located, but debtors are also able to file where they are “domiciled.” This just means where the business is incorporated or otherwise organized. The process can take anywhere from a few months to be finished, or can continue up to six months to two years.
Business Operations Typically Continue But Court Handles Major Decisions
While most Chapter 7 cases require that a trustee be appointed, a trustee is usually not appointed in Chapter 11. Rather, a debtor will continue day-to-day business operations as a “debtor in possession” (DIP). A bankruptcy court is able to appoint a trustee if it feels that the debtor has committed fraud, dishonesty, incompetence, or gross mismanagement of the debtor’s affairs.
Though a debtor is able to continue business operations, most major decisions are handed over to a bankruptcy court. Additionally, the bankruptcy court must approve the following:
any sale of assets, including property or real property. This excludes inventory sold by a retail debtor during ordinary course of business
either entering or breaking a lease of real or personal property
mortgages or other secured financing arrangements thatwill allow a debtor to borrow money after the bankruptcy case is filed
shutting down business operations
expanding business operations
entering or modifying contracts and agreements with unions, vendors, licensees or others and,
retention of and payment of fees and expenses to attorneys and other professionals.
Creditors Support or Oppose
Creditors, shareholders, and any other parties that hold an interest in the company have the option of either supporting or opposing actions requiring bankruptcy court approval. And the bankruptcy court must consider input from creditors, shareholders, and all other parties with an interest when deciding on how to proceed with the bankruptcy.
Unsecured Debt is not associated with a specific piece of property, which means that there is not specific property that serves as collateral for the debt. Unsecured creditors are able to participate in a Chapter 11 case through a committee that is appointed to represent all of the unsecured creditor’s interests.
Chapter 11 Reorganization Plan
A debtor typically has four months after filing Chapter 11 to propose a reorganization plan. These four months are usually considered exclusive, meaning that the debtor has the exclusive right to come up with the plan. This plan can also be extended or shortened.
After that “exclusivity period” expires, the creditors’ committee is able to propose a reorganization plan, although this is rare. Typically if creditors are dissatisfied with the debtor’s proposed plan, it will move to dismiss or convert the case to Chapter 7.
Confirmation of Chapter 11 Plan
Once a plan is approved it is referred to as “confirmation.” For a Chapter 11 plan to be confirmed, the plan must meet a number of requirements, including:
Feasibility. The proposed plan must be likely to succeed. This means that a debtor must be able to prove to the court that it will be able to raise enough revenue to cover its expenses over the plan term. This includes making all payments to creditors.
Good Faith. The plan must be proposed in good faith and not by means forbidden under applicable law.
Best Interests of Creditors. The plan must be in the best interests of its creditors. This means that creditors will receive as much in Chapter 11 as they would have if the debtor had gone through Chapter 7. Sometimes this means that a debtor will be required to pay creditors in full rather than just a fraction of what is owed.
Fair and Equitable. The plan must be deemed “fair and equitable” under the “fair and equitable” test. This means the following must be met:
Secured creditors (creditors that have a mortgage against real property or a lien against personal property included inventory or equipment) must be paid, over time, at least the value of their collateral.
The debtor is not able to retain anything on account of their equity interests unless all debts are paid in full. These debts can either be paid immediately following the confirmation of the plan, or over time. If paid over time, interest must be included. The bankruptcy court is able to allow equity holders (creditors) to retain ownership interests in the debtor in exchange for any “new money” that is contributed to pay expenses associated with reorganization of the debt. If this is not enabled by the court, equity holders lose all ownership rights once the reorganization plan is confirmed.
Some of the confirmation requirements apply only if the creditors vote against the proposed reorganization plan.
Working with a Bankruptcy Attorney
Attorney Ben Wright has the experience, skill and knowledge necessary to guide you through steps involved with a Chapter 11 bankruptcy. We will thoroughly review the financial situation of your business and if Chapter 11 is appropriate, prepare the petition and required schedules and documentation required by the bankruptcy court, including:
Schedule of assets and liability
Schedule of current income and expenditures
Schedule of executory contracts and unexpired leases
Statement of financial affairs
For individual filers, we will also provide a certificate of credit counseling and evidence of payment from employers, along with a statement of monthly net income and anticipated changes.
Bankruptcy can be an overwhelming process. That’s why we advise that you work with a phoenix chapter 11 bankruptcy lawyer that is familiar with various debt repayment options. We are committed to helping our clients understand their rights and options under the bankruptcy law and developing the debt relief solution that makes the most sense for each individual. We invite you to call (602) 648-3274 or contact our Arizona office to schedule a free initial consultation.
AZBK Lawyers 668 N. 44th St., Ste 320, Phoenix, AZ 85008 (602) 648-3274