SFX Entertainment Inc. Files for Chapter 11 Bankruptcy Protection

SFX Entertainment Inc. files Chapter 11

Recently, SFX Entertainment Inc., the electronic music concert production giant, announced that it had filed for Chapter 11 bankruptcy protection.

According to The Wall Street Journal, the company’s bankruptcy petition was filed to eliminate $300 million in outstanding liabilities by converting most bondholder debt into equity shares in the firm.

SFX Entertainment Inc. falls into insolvency

In court documents, SFX cited the fact that it missed its recent $3 million interest payment to its group of senior bondholders. A Your EDM report found that the company’s bondholders then announced that SFX was in default of its $5.8 million bond balance as a result. This was due to the cross-default provisions included in its $220 million senior bond debt and $30 million credit facility. Soon after entering default status on its bond debt, the company announced that it had received $20 million in financing to enable it to negotiate revised terms of its debt financing agreement with bondholders.

During these negotiations however, SFX failed in its attempt to make the company private because the transaction was disputed by Delaware Court of Chancery. The failed agreement would have offered bondholders $4.75 per share with the intention of increasing that amount to $5.25 per share at a later date.

In the aftermath of this failed attempt, the company’s U.S. operations became insolvent. According to a statement by a spokesperson for Tomorrowland, a major electronic dance music festival, while the company’s international subsidiaries will not be affected by the recent filing, its future is uncertain.

“Both the festival in Boom (Belgium) and the one in Itu (Sao Paulo, Brazil) will go ahead without any disruption due to the current situation,” Debby Wilmsen explained to Georgia Unfiltered as cited by Your EDM. “In light of the present situation, no concrete plans have yet been made for TomorrowWorld 2016.”

SFX Entertainment Inc’s reorganization plan

The debt-for-equity exchange with its group of senior bondholders will provide SFX with $115 million in debtor-in-possession financing to maintain its current operations through the bankruptcy period. Street Insider reported that the agreement, subject to court approval, will enable the company to continue its scheduled events while fulfilling financial obligations to artists, venues, sponsors, partners and various other stakeholders in SFX.

In bankruptcy documents, the firm also indicated that it intends to emerge from the restructuring process within six months with a new chief executive.

Are you a creditor in a bankruptcy?  Have you been sued by a bankrupt?  If you have any questions about your rights, please contact me, Joel Glucksman, at 201-806-3364.