Well, here we are on February 1 and the 2nd shoe has finally dropped for SFX. The company that puts on Tomorrowland and Life in Color voluntarily filed for Chapter 11 bankruptcy this morning . You will undoubtedly see a lot of uninformed fear mongering on the internet today and the rest of this week. While this is a stunning fall from grace for the EDM juggernaut, it’s important to clear up what this actually means.
What Does It Mean?
Chapter 11 reorganization will help SFX wipe $300 million in debt from its balance sheet and emerge a leaner privately held company. In fact, today’s filing was done in coordination with a group of SFX bondholders who will be affected so it’s not the hostile situation you might imagine. It is not a liquidation, which would see the company wind up and cease to exist. Many people assume bankruptcy is liquidation, but bankruptcy is designed to help companies avoid liquidation. SFX will not only emerge new again, but it will continue all operations during this process through $115 million in financing. Also, SFX’s international subsidiaries like ID&T are not included in this filing (Tomorrowland Belgium & Brazil).
No need for panic as SFX will still plan and produce all of its festivals without interruption. This process will also oust CEO Robert Sillerman and allow the company to find a new CEO. SFX expects to get through this process quickly provided the plan is accepted by a bankruptcy court in Delaware, where it was filed. Let’s hope that SFX can move through this swiftly and emerge a leaner and stronger company that we always wanted it to be. Signs point to the strengthening potential of the company as Tomorrowland sales broke numerous records last week. The new SFX might just be better than ever before.
Source: StreetInsider
