Digital Domain Media Group, Inc. (NYSE: DDMG) today announced
that as part of its previously announced strategic realignment, and
to ensure the long-term future of its core business and facilitate
a sale of assets, it has filed voluntary petitions for relief under
Chapter 11 of the Bankruptcy Code in the United States Bankruptcy
Court for the District of Delaware in Wilmington (“Court”) and is
also seeking ancillary relief in Canada, pursuant to the Companies’
Creditors Arrangement Act (CCAA) in the Supreme Court of
British Columbia, Vancouver Registry (the “Canadian Court”). DDMG
also announced that it has entered into a purchase agreement with
Searchlight Capital Partners L.P. (“Searchlight”) to acquire
Digital Domain Productions and its operating subsidiaries in the
United States and Canada (“DDPI”), including Mothership Media
(“Mothership”), subject to the receipt of higher and better offers
and Court approval.
DDPI and Mothership, with studios in California and Vancouver,
are focused on creating digital visual effects, CG animation and
digital production for the entertainment and advertising industries
and are led by recently promoted Chief Executive Officer Ed
Ulbrich.
“We’re excited to begin this new chapter in our history and look
forward to partnering with Searchlight,” said Ulbrich, a 20-year
veteran of the company. “The capital commitment of Searchlight will
enable us to continue to bring our expertise to feature films,
advertising, games, and other media experiences, with a focus on
what we do best – creating amazing digital productions. We remain
on track to deliver all of our clients’ productions on schedule, on
budget and at the highest degree of quality that they expect from
Digital Domain.”
During this process, DDPI and Mothership intend to continue to
operate without interruption in the ordinary course of business
including adhering to and seeing through client contracts.
“We believe in the visual effects business of Digital Domain,
led by Ed Ulbrich and his team, and are strongly committed to
maintaining the premiere product they create for customers and
moviegoers. Upon Searchlight’s consummation of the transaction, we
have committed and will continue to commit our strong financial
resources and expertise to ensure that this business always remains
healthy and vibrant,” said Eric L. Zinterhofer, co-Founder,
Searchlight Capital Partners L.P.
Under the terms of the purchase agreement, Searchlight will
acquire the assets of DDPI free and clear of all claims and
encumbrances pursuant to section 363 of the U.S. Bankruptcy Code
for the purchase price of $15 million. The sale will be the subject
of a public auction, and DDMG is required to engage in a process of
seeking the highest and best bid for these assets in accordance
with the proposed bid procedures as filed with the Court.
The Senior Noteholders, led by Hudson Bay Master Fund Ltd., have
agreed to provide DDMG with up to $20 million in
debtor-in-possession financing. If approved by the Court, DDMG,
DDPI and Mothership will have access to the funds to pay normal
operating expenses, such as employee wages and benefits, payments
to vendors and suppliers, and other obligations.
As previously disclosed, on August 10, 2012, DDMG retained
Michael Katzenstein, a senior managing director with FTI
Consulting, who now serves as Chief Restructuring Officer of DDMG
and its operating subsidiaries. Mr. Katzenstein’s overall
responsibilities include managing the day-to-day operations of
DDMG, guiding and overseeing these reorganization proceedings and
ensuring that the value of the estate is maximized for
creditors.
“DDMG has been working diligently to reduce costs for the
benefit of stakeholders and has already implemented various
strategic realignment initiatives that we believe will have a
positive impact on the robust and flourishing going concerns. In
tandem with Senior Noteholders and other parties, it was determined
that the use of these proceedings provides the most viable
opportunity for creditor recovery while also ensuring
identification of buyers who recognize the true value of these
assets,” said Katzenstein. “Importantly, we are grateful for the
cooperative assistance of our lenders, our customers and
employees as we work to seamlessly transition these important
businesses and other assets to financially strong and committed
buyers. Their ongoing support ensures the success of these
matters.”
As of June 30, 2012, the Company had total balance sheet assets
of approximately $205 million and total balance sheet liabilities
in the approximate amount of $214 million.
On September 7, 2012, DDMG announced the initiation of its
strategic realignment that will allow it to focus on its core
business Digital Doman Productions, Inc. As part of this process,
DDMG began the cessation of its Port St. Lucie, Florida operations
by reducing virtually its entire Port St. Lucie workforce by
approximately 300 employees and retaining approximately 20
employees. In addition, John C. Textor resigned effective September
6, 2012 from his positions as Chief Executive Officer and Chairman
of the Board of Directors of DDMG and from all other positions as
officer and director of DDMG’s subsidiaries.
Additional information regarding DDMG’s Chapter 11 proceedings
can be found at www.kccllc.net/DDMG or 866-927-7084.
About Searchlight Capital Partners L.P.
Searchlight Capital Partners, L.P. (“Searchlight Capital
Partners”) is a private investment firm founded in 2010 by senior
partners formerly with industry leading investment management
firms. Searchlight Capital Partners currently manages over $860
million, invests in a wide range of industries in North America and
Europe, and has offices in New York, London and Toronto. For more
information, please visit www.searchlightcap.com.
Safe Harbor Statement
Certain statements in this press release constitute
“forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements include
comments about the Company's plans, prospects, strategies and
future performance. They are made on the basis of our management’s
current expectations and beliefs, as well as a number of
assumptions regarding future events and business performance as of
the time the statements are made. Such forward-looking statements
are subject to known and unknown risks, uncertainties, assumptions
and other important factors, many of which are outside the
Company’s control. These could cause actual results to differ
materially from the results expressed or implied in the
forward-looking statements.
Such differences may result from actions taken by the Company,
as well as from developments beyond the Company’s control,
including, but not limited to: price volatility of the Company’s
common stock; changes in domestic and global economic conditions,
competitive conditions and consumer preferences; our dependence on
a limited number of large projects each year, and the timing of
revenue flows from those projects; developments in the status of
strategic initiatives taken by the Company; audience acceptance of
feature films we may co-produce; and rapid technological
developments, including new forms of entertainment.
Further information on these and other factors and risks that
could affect our business is included in filings we make with the
Securities and Exchange Commission from time to time, including
under the heading “Risk Factors” in our Annual Report on Form 10-K
for the year ended December 31, 2012 and our Quarterly Report on
Form 10-Q for the quarter ended June 30, 2012. These documents are
available on the SEC Filings subsection of the Investors section of
the Company’s website at: http://www.ddmg.co.
Information on our website is not part of this press release.
All information provided in this press release is as of September
11, 2012, and the Company undertakes no obligation to update
publicly the information contained in this press release, or any
forward-looking statements, to reflect new information, events or
circumstances, or to reflect the occurrence of unanticipated
events.
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