Scout Media’s no-good-very-bad 2016 is ending in the same fashion as the company announced Friday that it has filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code, per an internal memo sent to Awful Announcing (and confirmed by the Wall Street Journal).
Scout filed the petitions Thursday in U.S. Bankruptcy Court for the Southern District of New York on the heels of an involuntary Chapter 11 petition from three creditors claiming the company owes almost $800,000. Despite initially telling the Wall Street Journal that the “network would continue operating normally,” the bankruptcy plans could change that drastically.
Per Tom Corrigan of The Wall Street Journal on December 2:
If the bankruptcy wins a judge’s approval and is allowed to proceed, it would force Scout Media to create a plan to repay its creditors and could spell the end of the sports network altogether. Scout Media has 21 days to reply to the bankruptcy filing. Judge Michael Wiles will oversee the case.
The companies at the heart of the bankruptcy petition appear to be print services company LSC Communications (claiming $671,651 owed), Seattle staffing agency iMatch Services ($81,613) and catering company On Safari Foods ($29,116). LSC had sued Scout in November 2015 when it failed to pay on a contract. The two sides settled out of court in April for $667,001 but that deal fell apart when Scout allegedly defaulted on a $34,555 payment.
Things have been trending downward for Scout for much of 2016. When the company’s board terminated CEO Jim Heckman in July, the product team resigning en masse. It was also revealed that contributor payments were often a week late or more and reports that Scout hadn’t paid anyone on time in “several months.” The process of replacing the product team reportedly moved slowly and multiple former publishers aired their grievances, all of which culminates in the latest development.
WSJ had more insights having read the filing:
“According to court papers filed Friday with the U.S. Bankruptcy Court in Manhattan, a “perfect storm of an unsustainable balance sheet” as well as financial pressures caused by the abrupt departure of the company’s chief executive left the ailing business with no choice but to try to place its assets in the hands of a new owner as quickly as possible.
Amid the marketing process, a group of creditors sought to push Scout Media into bankruptcy. LSC Communications Inc., which says it is owed a judgment for $672,000 for unpaid printing services, and two vendors joined in signing the petition.
In papers filed in bankruptcy court, lawyers for the company have proposed a court-supervised process in which bids for Scout Media’s assets would be due Jan. 17. An auction would be held in Wilmington, Del., Jan. 19, with a hearing to approve the winner scheduled for the following week. U.S. Bankruptcy Judge Michael Wiles will oversee the auction process, a fixture of chapter 11 sales that is meant to ensure the company receives the best possible offer for its assets.
Following the auction, the company says it plans to wind down. Proceeds from the proposed sale could one day be used to repay its creditors, at least in part. In court papers filed Thursday, Scout pegged its total assets and liabilities each between $10 million and $50 million.”
“I think it’s a travesty that so many great men and women throughout the Scout network might possibly financially suffer due to too much over-promising and under-delivering from the executive level – both current and past leadership,” a former executive at a competing college football recruiting network told Awful Announcing. “I recruited my fair share of talent from competition; however, I knew my company’s financial limitations and would never jeopardize the corporation or the individuals.”
Below the memo publishers received from President, Craig Amazeen:
Scout will formally announce today that it has filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code. The petitions were filed last night in the U.S. Bankruptcy Court for the Southern District of New York.
Scout’s board of directors unanimously determined that a sale through the Chapter 11 process under Bankruptcy Code section 363 is in the best interest of the company, employees, publishers, customers, creditors and stakeholders. The process allows Scout to continue normal business operations while orchestrating an orderly restructuring of the company and continuing the already-in-motion sales process.
Important notes:
– I will send out additional information as the day progresses including an expected press release.– We will have an all publisher / employee / contractor call early next week
– This is all being handled at the corporate level and will not impact our day to day operations. So for the benefit of our millions of users – please continue to operate in a “business as usual” fashion, providing the fantastic content and communities that they’ve come to expect.
– Any media requests / sales process requests / or other outside inquiries should be directed to (redcacted)
Additional details later today.
Thank you for your continued, united efforts.
Hopefully the limbo publishers face under the Scout network begins to find a much more solid footing in 2017.
Comments are closed.