Cerberus Capital Management has stepped in and offered Gawker Media a lifeline to continue its operations and pay off its first-lien lender as it seeks a sale of its assets while under court protection.
The New York-based digital media company, which filed a Chapter 11 bankruptcy petition in a Manhattan bankruptcy court on Monday (13 June), requested use of a $22 million debtor-in-possession (DIP) loan. The postpetition financing consists of a $17 million term loan and a $5 million revolver. Press reports show the court approved temporary use of the loan Wednesday (15 June).
The facilities would carry interest rates of either Libor + 8 percent or JPMorgan Chase-set rate + 7 percent. Terms on the loan would set floors of 1 percent and 3 percent for the Libor and JPMorgan rates, respectively. A default on the loan would boost interest rates by 2 percent. The loan would come due in one year, when a bankruptcy exit plan takes effect or after a sale of substantially all of Gawker’s assets.
The Cerberus facilities would pay back first-lien lender Silicon Valley Bank, owed $6.2 million, as well as fund the debtor’s working capital. The money would also pay for costs associated with the Chapter 11 cases.
“Without access to the DIP facility… the debtors would suffer immediate and irreparable harm,” the postpetition financing motion read, “and the entire bankruptcy proceedings and the sale will be jeopardised to the significant detriment of the debtors’ estates and their creditors.”
The sale court papers refer to a proposed $90 million transaction under which Ziff Davis, a media company that owns brands such as men’s lifestyle publication AskMen and tech publication PCMag.
Under the court-supervised auction process, Gawker has proposed bid deadline of 27 July with an auction held three days later. The court would also need to approve the winning offer for a sale to be completed.
Gawker found itself in bankruptcy after a jury in a Florida state court found the company liable for $130 million in damages in a suit brought by professional wrestler Hulk Hogan, whose given name is Terry Bollea. The media outlet found itself in legal trouble after in October 2012 it releases portions of a sex tape Bollea allegedly filmed with the wife of his then-best friend.
The wrestler first sued Gawker in a Tampa, Florida, federal court in November 2012 but lost after the judge found the First Amendment protected the news outlet’s story. Bollea subsequently sued Gawker in a Florida state court, a case that went to trial in March. On Friday (10 June), the state court ruled Bollea could collect on his judgment. Gawker filed for bankruptcy the same day.
Gawker Media also owns Gizmodo, a technology news website, and Deadspin, which covers sports.