Ziff Mulling Pre-Packaged Bankruptcy

Technology publisher Ziff Davis Media is expected to announce by the end of this week whether it will enter into a pre-packaged bankruptcy filing or keep slogging through its current restructuring.

A spokesperson for the New York-based company said it would know by the end of this week whether it would submit a pre-packaged bankruptcy plan to a federal bankruptcy court (a somewhat different form of Ch. 11 bankruptcy).

Without a pre-existing package, the company needs to garner about 95 percent bondholders’ approval on the restructuring deal. Under a pre-packaged filing, the company only needs about 67 percent of bondholders’ approval on a restructuring plan. If Ziff fails to get 95 percent of bondholders on board, the pre-packaged bankruptcy plan would kick in.

The news is somewhat anti-climactic for the publisher, which has been clobbered by the collapse in the technology ad market that followed the Nasdaq sell-off over two years ago. Since the tech bubble burst, Ziff has been slashing costs, shuttering publications and very publicly reorganizing its debt for over a year now.

Among the “new economy” publications it has shuttered in the past year include its most recent casualty, Yahoo Internet Life, which closed in June after a seven-year run (The August issue was its last). The reason was the same one that did in other technology/new economy/Internet- focused publications such as the Industry Standard: The decline in the tech market along with the collapse of Internet-related ad dollars proved too much of a double whammy.

At the time of the June announcement about YIL, Ziff CEO Robert Callahan wrote in a memo to staff: “Advertising revenue in Yahoo Internet Life’s category declined significantly since last year. Its Year-to-Date market share decreased 52% over last year. Wired, its closest competitor demonstrated a 53% decline and Time Inc. discontinued On Magazine (formerly TIME Digital) last year, due to the diminished potential of the category.” Perhaps in a more ominous sign of the times facing many consumer-focused publishers, Callahan also wrote that revenue growth for the title was showing no sign of coming back in the months ahead.

Ziff has also shuttered Smart Business, and sold the Net Economy.

The company’s focus continues to be on the personal technology and game markets, where its PC Magazine and gaming titles are said to be leading or gaining new ground in their respective categories — and, most important, delivering readers to advertisers looking to reach the category of reader.

The biggest wolf at Ziff’s door over the past year and a half has been finding the cash in order to make $30 million annual payments on its $250 million, 12 percent (junk) bonds.

Instead of forcing Ziff into a bankruptcy filing last year when it was clear it didn’t have enough cash to make the loan payments, bondholders and Ziff’s principal owner Willis Stein & Partners got to work restructuring its the debt and shutting down publications.

Just last week, the company announced further progress towards completing its financial restructuring, noting that over 88 percent of holders of its $250 million bonds had accepted a $155 million write-down on the value of the debt (or about 60 percent of their face value). The deal also gives the company a two-year grace period on its $30 million annual loan payments on the bonds.

The offer has been extended to tomorrow in order to get more creditors and bondholders on board with the restructuring plan.

This story now clarifies an earlier version of the needed bondholder percentiles in third graph

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