An Indian IT Angle To Vice Media Bankruptcy
Vice Media has filed for bankruptcy after a series of high-profile investments left it highly leveraged and unable to pay debt.
Wipro Ltd. is the largest unsecured creditor at Vice Media LLC, which has filed for Chapter 11 bankruptcy in the United States, according to filings.
Wipro LLC, a New Jersey-based subsidiary of the Indian IT services firm, has unsecured claims of $9,905,086.59, or $9.9 million, from the bankrupt media firm, according to court filings seen by BQ Prime. Other creditors include the likes of HBO to CNN and Amazon Web Services.
The Bengaluru-headquartered software services firm is seen as one of the key reasons why Vice Media's bankruptcy became inevitable.
In May 2020, Wipro had initiated arbitration proceedings against Vice Media over a failed outsourcing arrangement that the media firm terminated, according to an Insider report dated Feb. 24, 2023.
Earlier this month, an arbitrator determined that Vice owed Wipro $9.9 million. Then, Wipro sought a restraining order that temporarily froze many of Vice Media's bank accounts, which "essentially shut off much of the liquidity to debtors", Chief Restructuring Officer Frank Pometti said in filings to the Southern District Court of New York, where the bankruptcy case has been filed.
When contacted, a Wipro spokesperson refused to comment on the matter.
Founded in 1994, Vice Media grew from a small-time magazine in Canada to a multimedia behemoth, with a TV channel, several digital media brands, multiple film studios with shows on HBO to Showtime. The rampant growth was fuelled by monies from several high-profile investors, who eventually wanted a return on their investments.
"Vice relied on external funding, raising both debt and equity capital to fuel its rapid growth and to fund expenses in certain parts of its businesses," Pometti wrote in the court filings. "Although these fundraising efforts helped to finance Vice's growth, they ultimately led to the company being burdened by a highly leveraged and unusually complex capital structure."
At its peak, the company was valued at $5.7 billion. In 2019, it raised a debt of $250 million from Fortress Investment Group and Soros Fund. Today, Vice Media and its 31 associated limited liability companies owe Fortress $476 million. The endgame will likely see the company get sold to Fortress and Soros Fund for $225 million.
"This accelerated court-supervised sale process will strengthen the company and position VICE for long-term growth, thereby safeguarding the kind of authentic journalism and content creation that makes VICE such a trusted brand for young people and such a valued partner to brands, agencies and platforms," Hozefa Lokhandwala and Bruce Dixon, co-chief executive officers, said in a statement.
CEO Nancy Dubuc left the company in late February when the troubles first surfaced. Since then, the company has shut down its international news service, Vice World News, and laid off 100 employees.
"We will have new ownership, a simplified capital structure and the ability to operate without the legacy liabilities that have been burdening our business," the co-CEOs said. "We look forward to completing the sale process in the next two to three months and charting a healthy and successful next chapter at VICE."