As most of you now know, EDM conglomerate SFX files for bankruptcy next week. It remains to be seen the ultimate effect due to this. Already we have seen that Tomorrowworld outside of Atlanta is not yet confirmed for 2016. Based on the fiasco that was the Saturday night of that event with thousands of people stranded and having to walk 10 miles in the rain and darkness only to have to wait for hours for rides back to the city, maybe this is a good thing.

SFX founder Robert Sillerman as part of the restructuring will step down as CEO but will remain Chairman of SFX’s board. The total debt oustanding appears to be a 1st lien of $50 million and a 2nd lien of $295 million (source: https://biz.yahoo.com/e/160205/sfxe8-k.html). The company’s stock was delisted from the NASDAQ on February 10, 2016 and is now trading on the OTC market (https://www.google.com/finance?cid=667454429706550).

When delisted the stock was trading at $0.01 per share on February 9th though it has rebounded slightly to $0.04 per share on February 11th.

Snap 2016-02-11 at 20.22.07

The outstanding bonds (debt) have been converted into equity and the bondholders contributed $115 million to help fund continued operations. It is important to note that the companies non-US properties were not including in the BK filing other than for missed buyout payments.

Below see the official SFX bankruptcy court filing:

SFX Entertainment Bankruptcy Filing with list of Debtors by EDM Life

Statement from Sillerman:

“This expression of confidence from our lenders is testimonial to the vibrancy and potential of our business, and the dedication and professionalism of the over 600 people who make up SFX. Of course this was not where we thought we’d be but with this restructuring we have the opportunity to achieve all that SFX can and will be. I’m looking forward to continuing to be part of the new SFX as Chairman. We will immediately commence a search for a new CEO to lead us as we continue to set the trend in the exploding culture that is electronic music.”

On the topic of Tomorrowland in Belgium, as the 50% stake in ID&T that was originally sold to SFX was bought back by ID&T, they are not directly affected by the bankruptcy filing in regards to the events they currently produce. The following is a statement from Debby Wilmsen, Tomorrowland Press Coordinator:

“Both the festival in Boom (Belgium) and the one in Itu (Sao Paulo, Brazil) will go ahead without any disruption due to the current situation. In light of the present situation, no concrete plans have yet been made for TomorrowWorld 2016.
We are currently exploring all possibilities. Tomorrowland has always worked from a long-term philosophy and in this context, all options are being considered to ensure that, like in Belgium and Brazil, the festival will have a bright future in the United States as well.

In the past few months, it had been clear that SFX, our partner for TomorrowWorld and Tomorrowland Brasil, is experiencing financial difficulties. Last night we received the news that SFX Entertainment, the publicly listed American company founded by Robert F.X. Sillerman, has applied for Chapter 11 bankruptcy protection from creditors. In the coming weeks, SFX will be undergoing a financial and operational reorganization. SFX Entertainment is a stakeholder in numerous events and projects including Awakenings, Sensation, Nature One, Electric Zoo and Rock in Rio.

Since 2013 we have collaborated with SFX for the foreign editions of Tomorrowland held in the USA and Brazil. However, we have noticed that our vision and goals, including a long-term strategy, are different from those of the publicly listed company.

In 2013 the Dutch company ID&T, which then owned 50% of the shares in Tomorrowland, sold its business to the American SFX. Manu & Michiel Beers then decided to buy back the 50% stake that the Dutch ID&T held in Tomorrowland in Belgium, with the result that for the past two years, the Tomorrowland festival has been 100% Belgian, but this has entailed an obligation to collaborate SFX for the foreign editions.

The Belgian festival Tomorrowland remains the passion and life’s work of the driving forces behind its creation, Manu & Michiel Beers and their young, motivated staff in Antwerp and they intend to continue to bring the same level of ambition to the festivals in Belgium and abroad in the coming years.

The Chapter 11 procedure will have no consequences for Tomorrowland in Boom. The festival in Belgium is created, organized and managed for 100 % by the Belgian team. Tomorrowland Brazil will also take place as planned two months from now in Itu (Sao Paulo). Tomorrowland Brazil is being organized in close consultation with the Belgian team by a motivated Brazilian team that is able to work independently of SFX in North America for all aspects of the event.”

 

While SFX clearly bit off more than they can chew with their business plan, in the long run we can only hope all of the individual pieces they acquired continue to operate in the same manner as pre-acquisition.