Frontiers Media LLC, publisher of Southern California’s largest-circulation gay magazine, has asked the U.S. Bankruptcy Court to approve a sale of the financially troubled company for $361,000.
The request, filed Friday, comes after Frontiers’ failure to convince its two largest creditors — Wells, Fargo and Frontiers Publishing (the magazine’s original owner) — to substantially reduce the $2.3 million debt it owes them.
Frontiers proposes that the court authorize sale of the company to Noble Media Ventures, which earlier had offered to buy it for $300,000. Noble is a California company incorporated ten months ago. It has said it will fund the acquisition through a “special purpose entity” or SPE. That is a financial maneuver that would allow Noble to own Frontiers and solicit money from outside investors with no risk to Noble if Frontiers were to fail.
Noble proposes to pay Wells Fargo $140,000 and Frontiers Publishing $95,153. The remaining $125,847 would be used to pay some portion of the almost $800,000 that Frontiers owes more than 80 smaller creditors, including printers and freelance writers. Frontiers owes Wells Fargo $1.3 million, a sum that was reduced by a payment of $300,000 from a life insurance policy held by Frontiers co-owner Mark Hundahl, who died in December. It owes Frontiers Publishing $874,000.
In the petition, Frontiers Publisher David Stern says he approached “colleagues who were in, or who were formally (sic) in, the publishing space, resulting in the instant transaction.” The petition doesn’t identify the “colleagues” who would fund the Noble acquisition. Stern also said another group, also unidentified, has expressed an interest in Frontiers.
In its petition to the court, Frontiers argues that the sale to Noble is the only viable solution to its financial woes. It notes Frontiers’ poor cash situation, noting that while the magazine brought in $61,000 more than it spent in July, when clients typically pay for ads in the June Gay Pride issue, it spent $39,000 more than it received in August and had positive cash flow of only $441 in September.
“Clearly the Debtor’s cash flow is insufficient to sustain its business operations… and a restructuring of the (money owed) the Debtor is also highly unlikely,” the Frontiers petition says.
The proposed sale is billed as an “arms-length transaction,” but, Stern said, “it is anticipated that NMV will hire most, if not all of the Debtor’s employees, including myself.” In an earlier filing with the bankruptcy court, Noble expressed its interest in retaining Stern and Dustin Tyner, who is the company’s managing director of integrated media.
Frontiers has asked for a hearing on Dec. 5 before U.S. Bankruptcy Judge Richard Neiter to get his approval of the proposal. Earlier Neiter set a Nov. 1 deadline for Frontiers to present a plan to sell the company and, failing that, a Dec. 6 deadline for restructuring it to make it a viable ongoing business. Such a plan typically includes agreements by creditors to reduce the debt they are owed and various cost-cutting measures. If neither is approved by the court, it is likely that Frontiers’ assets will be auctioned to the highest bidder.
