NEW YORK--(BUSINESS WIRE)--Ziff Davis Media Inc. (“Ziff Davis” or the “Company”), an indirect wholly-owned subsidiary of Ziff Davis Holdings Inc., announced today that it has reached an agreement with an ad hoc group of holders of more than 80% in principal amount of its Senior Secured Floating Rate Notes (the “Senior Secured Notes”) on the terms of a restructuring to reduce substantially the Company’s funded indebtedness.
In order to implement the restructuring and permanently improve its capital structure, Ziff Davis and certain of its affiliates today elected to file Chapter 11 petitions in the U.S. Bankruptcy Court for the Southern District of New York (the "Court"). The Company intends to implement the restructuring through a pre-arranged plan of reorganization that the Company shortly intends to file. The Company intends to seek Court approval of the pre-arranged plan as soon as possible. Ziff Davis expects operations to continue as usual during the reorganization process and expects to emerge from Chapter 11 this summer.
Importantly, as part of the restructuring, the ad hoc noteholder group has agreed to set aside up to $24.5 million to fund the Company’s operations during the Chapter 11 case as well as after the Company emerges from Chapter 11. These funds, together with the Company’s current cash reserves and cash flow from operations, will be sufficient to fund its operations during the reorganization process. In addition, the restructuring, if approved by the Court, will result in a substantial de-leveraging of the Company’s balance sheet. Specifically, $225 million (principal amount) of senior secured indebtedness (including the Senior Secured Notes) will be exchanged for a new $57.5 million (maximum face amount) senior secured note and at least 88.8% of the common stock in the reorganized Company. The restructuring provides for 11.2% of the reorganized Company’s common stock to be distributed to holders of the Company’s subordinated unsecured notes if the class of such holders votes to accept the restructuring. Holders of the Company’s subordinated, unsecured notes have not yet agreed on the restructuring; however, the Company believes the restructuring plan can be approved by the Court without their agreement.
Jason Young, Chief Executive Officer of Ziff Davis Media, said “This agreement underscores our Senior Secured Noteholders’ confidence in our ability to position ourselves for continued profitable growth. Today’s restructuring agreement goes a long way towards resolving the burdens of a debt load and capital structure established seven years ago, during a leveraged buyout of the Company.”
“Operationally, we are also making great progress,” continued Mr. Young. “As a result of our employees’ hard work, we ended 2007 on a strong note. We matched audience growth with impressive digital revenue expansion. And while the print market continued to be challenging, we continue to be print category leaders in the markets we serve.”
Ziff Davis also announced that, despite good faith negotiations with certain of its subordinated unsecured noteholders, the Company has been unable to reach a consensual agreement with such holders. The Company intends to work with its constituencies, including its subordinated unsecured noteholders, throughout the Chapter 11 process.
“In light of the progress we have made with our senior secured creditors, and after careful consideration of all of our alternatives, we have concluded that a court-supervised process will accelerate – and finalize – our restructuring while helping to ensure that current business operations continue,” added Mr. Young. “Through this process, we will improve our capital structure and align it with the size of our current business operations. We have great strength in our industry leading brands and products and we believe that this restructuring will allow us to unlock the underlying value of our businesses and achieve our true growth potential.”
In conjunction with today’s filing, the Company filed a variety of customary “first day” motions to support its employees and vendors during the reorganization process. As part of these motions, the Company has asked the Court for permission to continue paying employee wages and salaries and to provide employee benefits without interruption. Additionally, during the restructuring process, vendors and business partners should expect to be paid for post-filing goods sold and services rendered to the Company in the ordinary course of business.
Ziff Davis has retained Alvarez & Marsal as financial and restructuring advisor and Winston & Strawn LLP as legal counsel to provide professional services in connection with these restructuring efforts. The ad hoc noteholder group is advised by Houlihan Lokey Howard & Zukin and Paul, Weiss, Rifkind, Wharton & Garrison LLP.
Additional information about Ziff Davis Media’s restructuring is available at the Company’s website www.ziffdavis.com. For access to Court documents and other general information about the Chapter 11 cases, please visit www.bmcgroup.com.
About Ziff Davis Holdings Inc.
Ziff Davis Holdings Inc. is the ultimate parent company of Ziff Davis Media Inc. Ziff Davis Media Inc. (www.ziffdavis.com) is a leading integrated media company serving the technology and videogame markets. Ziff Davis currently reaches over 26 million people a month through its portfolio of 15 websites, three award-winning magazines, consumer events and direct marketing services. The company is headquartered in New York and also has offices and labs in San Francisco. Ziff Davis exports its brands internationally in 45 countries and 13 languages.
Except for historical information contained herein, the statements made in this release including anticipated future revenues and operating results, cash balances and cost savings, constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements are subject to certain risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. Such risks and uncertainties include risks associated with our existing defaults under our compounding notes and senior secured notes, a potential deterioration of our business due to our current restructuring efforts, a potential deterioration of the economic climate in general or with respect to the markets in which we operate, risks associated with new business investments, acquisitions, competition and seasonality and the other risks discussed in the Company's Annual Report on Form 10-K and other filings made with the Securities and Exchange Commission (which are available from the Company or at http://www.sec.gov), which discussions are incorporated in this release by reference. These forward-looking statements speak only as of the date of this release. After the issuance of this release, the Company might come to believe that certain forward-looking statements contained in this release are no longer accurate. The Company shall not have any obligation to release publicly any corrections or revisions to any forward-looking statements contained in this release. No assurances may be given that the Court will approve the restructuring described above or that such restructuring will be implemented as described or at all.