Willkie client Troika Media Group, Inc. (together with its affiliates, “Troika”) completed a financial restructuring in March after nearly two years of extensive negotiations between Troika, its secured lender, and other stakeholders.
Two years earlier, Troika had acquired Converge Direct, LLC (“Converge”) for a mix of stock and cash valued at $125 million. Troika funded such acquisition with a portion of the proceeds of a new term loan and with the issuance of preferred equity. Approximately $29.1 million of that purchase price was placed into an escrow account that governed when it would be released to the four selling shareholders of Converge (the “Converge Sellers”).
By June 2022, the company was facing significant challenges and found itself in default under its credit facilities. Around the same time, the Converge Sellers requested the release of the escrowed $29.1 million and other amounts that the Converge Sellers believed were owing to them under the sale documents. Given the defaults under the credit facility, the secured lender did not consent to the release of the escrowed funds.
Troika retained Willkie in November 2022 and, based on Willkie’s recommendation, Troika appointed two new independent directors and formed a special committee of the board of directors to evaluate Troika’s strategic options and to oversee negotiations between the secured lender, the Converge Sellers and other stakeholders. Troika also retained Jefferies LLC to conduct a marketing process to explore potential refinancing and sale options.
Throughout 2023, Troika pursued an extensive prepetition marketing process and attempted to build consensus for an out-of-court restructuring. But the company’s challenges and wide gap in negotiating positions between the various stakeholders proved difficult to navigate out of court. In December 2023, the company commenced a chapter 11 proceeding in the United States Bankruptcy Court for the Southern District of New York to pursue a sale of its assets under section 363 of the Bankruptcy Code, with its secured lender agreeing to finance the chapter 11 process with a debtor-in-possession financing facility and to acquire the company’s assets by credit bidding the debt. The Honorable David S. Jones presided over the chapter 11 case.
Immediately after commencing the chapter 11 case, Willkie filed a motion on behalf of Troika requesting the appointment of a mediator to help resolve the disputes between Troika, its secured lenders, the Converge Sellers, and the newly appointed official committee of unsecured creditors. Judge Jones granted the motion and appointed the Honorable Michael E. Wiles to mediate the disputes. Judge Wiles participated in the two-day mediation and guided the parties to a settlement of all of the open issues in the chapter 11 case, including the allocation of the $29.1 million held in escrow, a resolution of all claims by and among the mediation parties, and the establishment of a $500,000 fund for allowed general unsecured claims.
At the end of February 2024, Troika completed the sale of its assets to the secured lender after determining that the stalking horse bid was the highest or otherwise best bid available. Willkie then guided Troika through the confirmation of a liquidating chapter 11 plan that implemented the settlements achieved at mediation.
In the end, with Willkie’s counsel, the company navigated a very complicated situation and preserved its business as a going concern, including the jobs of more than 80 employees, while securing a distribution to general unsecured creditors.
The Willkie team was led by partner Brian Lennon, and included partners Maurice Lefkort, Philip DiSanto and Hugh McLaughlin, counsel Jamie Eisen, and associates Betsy Feldman, Yara Kass-Gergi, and Philip Dalgarno.
Jul 23
Deal Summary
