CASE PROFILE: Interactive media company iMedia Brands looks to find a buyer or reorganize in Chapter 11

Legal Analysis 29 June

CASE PROFILE: Interactive media company iMedia Brands looks to find a buyer or reorganize in Chapter 11

ValueVision Media Acquisitions, the owner of shopping-focused television networks doing business as iMedia Brands, entered Chapter 11 in free fall hoping to finalize discussions with a prospective buyer or find another path to a reorganization that generates consensus among its creditors and other financial stakeholders.

The company filed a Chapter 11 petition on 28 June, reporting assets of USD 272.6m against total debts of USD 373.7m.

The case has been assigned to Judge Karen Owens, who has not yet scheduled a first day hearing.

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With its Chapter 11 filing, iMedia becomes the eighth company in the media sector to seek shelter in bankruptcy this year, according to Debtwire restructuring data.

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DebtwireDockets: iMedia Brands Inc

The company

The company bills itself as an interactive media business that capitalizes “on the convergence of entertainment, e-commerce, and advertising,” said a first day declaration from James Alt of Huron Consulting Group Inc, who also serves as iMedia’s chief transformation officer. The company has about 600 employees worldwide, with another 100 employees working for iMedia non-debtor affiliates.

The company owns a series of entertainment, consumer brands and media commerce services businesses that since 2021 has aimed to use its television networks and access to consumer data to “drive new revenue streams in digital advertising, retail and e-commerce.” Among its portfolio of businesses, iMedia holds the rights to women’s apparel and accessory retail brand, Christopher & Banks, as well as an advertising business acquired from Synacor Inc in 2021 that now operates as iMedia Digital Services. Alt also said that the iMedia in 2021 purchased, a German interactive media brand that reaches 40 million homes in Germany and Austria.

In addition to the brand, iMedia’s entertainment business segment consists of television networks ShopHQ, its flagship network, ShopBulldogTV, and ShopHQHealth. All of the networks focus on promoting products for sale, ranging from jewelry and home beauty goods to health and wellness products. Alt said that the entertainment business accounts for 84% of iMedia’s overall revenue, although the company reported a net operating loss of USD 101.9m in the 2022 fiscal year.

The consumer brands segment consists of Christopher & Banks, which has five brick and mortar retail shops plus other means of selling its goods, and an accessories brand, JW Hulme Company, that sells through multiple channels, including a single brick and mortar retail shop, direct to consumer catalogs. Both consumer brands have a “growing wholesaling business driven primarily” by promotion of their brands on iMedia entertainment networks, according to Alt. The consumer segment posted an operating profit of USD 8.8m in 2022.

Finally, the media commerce services segment accounts for about 8% of total revenue, and consists of the iMedia Digital Services digital advertising brand and a software-as-a-service platform known as Float Left. This segment posted a USD 4.9m operating profit in 2022, said Alt.

The company’s equity has traded publicly on the Nasdaq exchange, according to the first day declaration.

The debt

Coming into its Chapter 11 case, iMedia has USD 129.6m in funded debt under various loan obligations and notes. In terms of secured debt, iMedia owes USD 19.4m on a prepetition asset-based loan (ABL) facility and USD 4.1m on a seller note tied to its acquisition of the digital advertising platform from Synacor.

On the unsecured side, iMedia’s funded debt consists of several different notes adding up to USD 106.1m, with the largest portion of that falling under 8.5% senior unsecured notes totaling USD 81.7m.

Beyond its funded debt obligations, however, iMedia also reported significant trade debt consisting of USD 130.4m in accounts payable.

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The descent

Alt said iMedia’s business experienced an uptick during the early stages of coronavirus pandemic during which home shopping increased and pumped up the company’s revenues.

That trend did not continue—“over the past two years, however, the Debtors believe that inflationary pressures have altered consumer behaviors and reduced discretionary at home spending,” said Alt. The company felt the shift in consumer behavior particularly heavily in its entertainment business segment, which generally accounts for the lion’s share of iMedia’s revenue.

The impacts on operations have, in turn, delivered a blow to iMedia’s liquidity position that has only worsened as it led to reductions in borrowing availability under its ABL facility. Facing those financial strains, Alt said, iMedia in April began engaging with its ABL lenders, sought out alternative financing possibilities and pursued a potential sale to third parties.

The Chapter 11 case

Alt said that, during the several months leading up to the Chapter 11 filing, iMedia has made some progress in talks with a potential buyer for the business. Through either a potential sale transaction or other means, the company’s goal in the bankruptcy process “is to achieve an orderly, efficient, consensual, and successful reorganization and value maximizing result,” said Alt.

The transformation officer noted that, with discussions underway with at least one potential acquirer, iMedia is hoping to focus early in the Chapter 11 case on finalizing the proposed deal that the company believes would allow it to continue its business as a going concern. During the bankruptcy case, iMedia has sought to use cash collateral to fund itself.

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 The advisors

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