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May 15 (UPI) -- Vice Media Group filed for Chapter 11 bankruptcy Monday as the once-thriving digital media company has struggled to turn a profit in recent years due to growing debt and major slumps in advertising and content revenue. A group of creditors, including Monroe Capital, Fortress Investment Group, and Soros Fund Management, have reportedly offered $225 million to buy Vice.
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Vice, which filed voluntary petitions for reorganization in the U.S. Bankruptcy Court for the Southern District of New York, won't get a cash payout under the current bid because the creditors are seeking to swap secured debt for the company's diverse portfolio of assets.
If the sale proceeds, the cash-out would come in the form of loans already made to the company, while the investment group has agreed to assume "significant liabilities" as part of the deal.
Months ago, Vice defaulted on a $250 million loan secured from Fortress and Soros in 2019 as the company struggled to stay above water, and now the creditors are seeking to recoup their losses.
"It's the lender coming in and saying, 'I'm done funding the losses -- if I'm going to fund the losses, I'm going to take control of the company," said Eric Snyder, chairman of bankruptcy at the law firm Wilk Auslander. "It's not unusual for the lender to come in and tell the debtor, the borrower, 'You're putting this into bankruptcy, you're going to make a motion to sell, we're going to put in a first bid.'"
The creditors have also secured a $20 million loan to keep the business running with its myriad other holdings, including Vice News, Vice TV, the ad agency Virtue, Pulse Films, and the recently acquired Refinery29.
The group would acquire Vice outright unless a competing bid emerges before the current offer becomes final in two to three months.
The company, which launched as a magazine in Canada in 1994, quickly grew into a $5.7 billion company, and took Wall Street by storm in its initial public debut.
Media giants like Disney and TPG Capital invested and lost hundreds of millions of dollars, hedging that social media networks would help build a robust audience of young media consumers and lead to major advertising profits.
Instead, the lion's share of digital ad dollars went to the major tech platforms like Google and Meta.
Vice executives issued a statement Monday praising the sale, saying it will "strengthen the company and position Vice for long-term growth."
"We will have new ownership, a simplified capital structure and the ability to operate without the legacy liabilities that have been burdening our business," co-CEOs Bruce Dixon and Hozefa Lokhandwala said.
The announcement comes days after Buzzfeed also announced layoffs and the closing of its news division following massive declines in revenue in the first quarter.
