SFX Entertainment files for bankruptcy

[RichoKidd]

Source: http://inthemix.junkee.com/sfx-entertainment-has-filed-for-bankruptcy/137527

 

 

SFX – the American company that owns dance music brands like Beatport, Tomorrowland and Stereosonic – has filed for bankruptcy.

 

After a year of financial struggle, the company has today filed for a Chapter 11 bankruptcy in the US, a move that will help them to wipe $300 million of debt and continue to operate as normal – at least for now. A deal struck with bondholders will convert part of that debt into equity in SFX, which has been taken off the stock market and will now be run as a privately-owned company.

 

But SFX founder Robert Sillerman will step down as CEO of the company, remaining on-board instead as Chairman. “Of course this was not where we thought we’d be but with this restructuring we have the opportunity to achieve all that SFX can and will be. I’m looking forward to continuing to be part of the new SFX as Chairman,” he said. “We will immediately commence a search for a new CEO to lead us as we continue to set the trend in the exploding culture that is electronic music.”

 

In 2012, as “EDM” exploded in the US, SFX begun acquiring various brands and promoters as part of Sillerman’s $1 billion plan to conquer dance music. The company currently owns or holds a large stake in events like Tomorrowland and its troubled American offshoot TomorrowWorld, plus Mysteryland, Electric Zoo and Australia’s own Stereosonic, who have been contacted for comment.

 

Beatport, which was acquired by SFX in 2013, has assured that the bankruptcy won’t affect their operations. “For all of us here at Beatport, it’s just business as usual,” they said in a statement issued today. “That means entire Beatport platform is fully operational without restriction. The store remains open. The streaming service continues uninterrupted. New releases are being added every day. New videos are being scheduled and filmed. Payments to labels and suppliers are ongoing in their usual manner.”

 

SFX’s highly-publicised financial difficulties include defaulting on a USD$10.8 million loan last month and missing a $3 million interest payment in January. The company’s share price on the New York Stock Exchange fell from $927 million in December 2013 to just $9.5 million in January 2016.

[LabRat]

How can they be so much in debt? They obviously don't make as much as I thought 

[RichoKidd]

The reason all festivals are starting to fail is they don't have an escape plan if shit hits the proverbial fan. If tickets don't sell as well as they projected, they aren't just gonna cancel, instead, they borrow to pay acts and staff and oh so many different variables.  That being said, so much more goes into it then we could every really understand. I'd hate to be in the position they're in now.

[LabRat]

That's a fair point actually

[Kodiak]

The way business banking works is the company has to constantly provide the banks with their financials (usually monthly but may be more often at this size). If the bank is in anyway concerned about their ability to service the debt they issue a notice to repay the debt usually within 30 days. Can't pay, they bring in the administrators (special accounting firm) that remove anyone who runs the business. They then run it until they decide the best way to get the creditors their money back. Either by working through it and selling off the business (or parts of) or liquidating it. No pussy footing around like consumer loans. 

 

This is is where the $10m default will have come from. If one bank is calling in the debt it's a brave one that will take it on. 

 

So they've obviously borrowed big to buy all the things. Considering they probably have very little as far as tangible assets like buildings, equipment or stock. Main asset they would have is money in the bank and future potential earnings. Probably a heap of corporate excess along the way and suddenly income generated is a long way from projections. And then you are in a tough spot. Got to spend money to make money, but got no money to spend. 

 

My my guess is Beatport will be sold off as it is probably a profitable division. The festival side will go kaput. 

[AlexJ]

there is still so much money to be made in festivals however the 'acts' are no longer the thing selling tickets for these mega-huge events. They are selling a spectacle. Thats why tomorrowland, holy ship, coachella, burning man etc etc have no problems. not only do they have great acts but couple that together with an overall experience like no other and you have a winner. tommoroworld tried to be like a tomorrowland v2 but from what ive heard literallly half assed everything. they tried to make an event that was so much larger without out really adding anything. what did they sell like 30% of tickets or something? did not take into account the fact they were breaking into a new market etc. Happened with a couple other SFX events from memory as well. tried to go full hog and then flopped because they half-assed it