Digital Marketing Co. Pursues Ch. 11 Sale To Lenders
Advertising technology firm Digital Media Solutions is seeking Chapter 11 protection in Texas and plans to sell its assets to a group of existing lenders in a deal that would erase $95 million in prepetition debts.
In initial court filings submitted Wednesday, the company’s co-founder and CEO, Joe Marinucci, said the business began suffering from post-pandemic shifts in consumer behavior beginning in 2022 that led to reductions in spending by its customers in the auto insurance industry.
After the company rode high during the worst of the pandemic due to lower rates of auto accidents, a return to normalcy and more frequent payouts from insurers led to those clients reducing their ad spending, Marinucci said.
This loss of business led Digital Media Solutions to incur significant revenue reductions in 2022 and 2023, and caused the company to default on the covenants governing its loan agreements in March 2023, Marinucci said in a first-day declaration.
A liquidity crisis caused the Florida-based company to begin exploring strategic alternatives, including contacting 118 potential buyers for the business in April 2024, according to the declaration. A third-party strategic buyer emerged from this process but ultimately abandoned its planned acquisition of the debtor on the eve of a bankruptcy filing, Marinucci said.
Digital Media Solutions then pivoted to a stalking horse credit bid transaction with a group of existing lenders that will see those lenders wipe out $95 million of prepetition debt along with the assumption of certain liabilities.
Those same lenders are providing $122 million in debtor-in-possession financing, consisting of $30 million in new-money loans and a rollup of about $92 million in existing debt. U.S. Bankruptcy Judge Alfredo R. Pérez approved the interim financing package at a virtual first-day hearing on Wednesday afternoon.
The debtor came to court with $346 million of secured debt in the form of multiple term loans and a revolving credit facility, according to Marinucci.
“We are now moving forward with the support of highly sophisticated investors, and we believe their commitments for new financing and the (asset purchase agreement) underscore their conviction in our business and the future of DMS,” Marinucci said separately in a statement Wednesday.
Judge Pérez also said he would sign off on the company’s motions to pay $1.8 million in wages and benefits to its nearly 250 U.S. and Canada employees, and up to $14.7 million to critical vendors, among other approvals.
Kirkland & Ellis LLP’s Alexandra F. Schwarzman, counsel for the debtors, said during the hearing that the company expected an auction and sale hearing to take place in late October, with a confirmed plan to become effective some time in November.
Judge Pérez set a second day hearing to be held remotely on Oct. 8.
The debtor is represented by Joshua A. Sussberg, Elizabeth H. Jones and Alexandra F. Schwarzman of Kirkland & Ellis LLP, and John F. Higgins, M. Shane Johnson, Megan Young-John and James A. Keefe of Porter Hedges LLP.
The lead case is In re: Digital Media Solutions Inc., case number 24-90468, in the U.S. Bankruptcy Court for the Southern District of Texas.
—Editing by Hilary Russ and Covey Son.
