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SFX appoints restructuring experts, bankruptcy options now on the agenda
By Chris Cooke | Published on Friday 8 January 2016
We’ve all been speculating for months now that EDM powerhouse SFX was heading towards bankruptcy, but as of today EDM powerhouse SFX is speculating that EDM powerhouse SFX may be heading towards bankruptcy. I should probably stop referring to it as a “powerhouse”. EDM potting shed SFX is now considering bankruptcy.
As much previously reported, 2015 was a terrible year for the dance music festival promoting and Beatport operating SFX. Having grown rapidly through an acquisition spree in previous years, and floated in 2013 amidst much hype about the ticketing-selling and brand-partnership-securing power of music with bleeps, the latest venture from entertainment industry veteran Robert FX Sillerman started to wobble big time.
The plethora of EDM brands SFX had bought up failed to deliver the immediate financial rewards investors had expected, the cash pile started to dwindle, and two aborted attempts by Sillerman to take the firm back in private ownership added to the frustration on Wall Street. The company’s share price tanked, reaching an all time low of fourteen cents during after-hours trading last night.
In December, the company confirmed that it had asked bankers Moelis & Co to investigate restructuring its debts, which were reportedly in the region of $300 million. By that point the firm’s board had been accepting offers for the company or its assets for months, but potential buyers were seemingly concerned about what liabilities might come with buying chunks of the business.
Over Christmas it emerged that a content partnership deal with Spotify had been called off, and SFX would reportedly have to pay back an advance it received on that deal. There was some incoming cash flow from the sale of artist management business TMWRK, seemingly back to the agency’s managers, but that is basically another sign that commercially viable companies previously acquired by SFX are now looking for a way out of the group.
In a new filing with the US Securities & Exchange Commission yesterday, SFX announced it had hired FTI Consulting to “serve as the company’s Chief Restructuring Officer” and to evaluate and assess “various restructuring and strategic alternatives, including working with management to analyse and optimise operations and financial performance”.
Listing what options were now being considered, the SFX statement said: “There can be no assurance that the company will be successful in identifying or implementing, on favourable terms or at all, any financial or strategic alternatives, which may include restructuring the company’s debt, the issuance of additional equity or debt, or the sale of some or all of the company’s assets. In order to facilitate its reorganisation, the company may consider utilising the available protections under the federal bankruptcy laws”.
Most of the festival brands acquired by SFX will still be attractive to a number of potential bidders once cut free from the parent company’s liabilities, and this could well be the last attempt to keep the EDM business going at large before a proper fire sale of assets begins. Time will tell.
Elsewhere in the file marked ‘EDM Bubble: Burst’, just before Christmas London-based dance music-focused booking agency Elastic Artists confirmed it was now in administration. A memo to clients confirmed weeks of speculation that financial problems – which had resulted in artists not being paid their fees for gigs performed – had basically finished off the once popular niche agency.
According to FACT, the new memo said that artists and other creditors should see “a proportion of the money owed. Unfortunately it is unlikely that 100% of the money owed will be received and it is likely that it will take a number of months for artists and promoters to receive such payment. At this juncture we are not able to comment on the timing or level of payment that will be received”.
Beyond the mess of unpaid bills, various agents formerly with Elastic, most of whom were seemingly unaware of the financial issues until very late in the day, are popping up with their rosters elsewhere. Clemence Renaut and Roxane Dumoulin have just joined ATC Live, while others are involved in new business Orchid.
