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Source Interlink 'Significantly Deleverages' Business

Company also announces closing of enthusiast title.



Michael Rondon By Michael Rondon
08/21/2013

Source Interlink has reached an agreement with majority investor GoldenTree Asset Management to recapitalize the company. The deal "significantly deleverages" each of the company's core business units, Source Interlink Media and Source Interlink Distribution, while increasing GoldenTree's stake in the group.

"The tremendously improved capital structure will provide both Source Interlink Media and Source Interlink Distribution with the ability to maximize transformational opportunities across their respective industries," says Michael Sullivan, president and CEO of Source Interlink, in a statement. "This transaction will put both businesses in better positions to strengthen strategic partnerships and make investments to enhance their position in their respective industries."

Stephanie Justice, executive vice president and chief administrative officer for Source Interlink, tells FOLIO: that there will be no layoffs or reorganization associated with the recapitalization. Justice also notes that the recapitalization was balanced in "an equitable fashion" between the two major divisions. 

The move comes four years after Source Interlink¬†filed for Chapter 11¬†bankruptcy protection. The company‚ÄĒthen publically-traded‚ÄĒremerged under private ownership, shedding $1 billion in debt-to-equity swaps with creditors.

Sullivan was brought on a year later amidst whispers of a possible sale.

"This is a very typical move that most media companies that were acquired by private equity firms in the past 5-7 years are making," says Reed Phillips, CEO and managing partner of investment firm DeSilva + Phillips, in an email to FOLIO:. "Most of these buyouts were overleveraged and can no longer support the level of debt that was originally put on the businesses, and are thus being restructured. That simply means that debtholders take equity in exchange for reducing the debt load on the company and the equity holders see their positions shrink to the point where many are no longer in control of the business. The net result is that this is very good news for the company because they can start to run their businesses without the constraints they had when the company was overleveraged."
 

Skateboarder Magazine Shuts Down

Skateboarder Magazine killed most of its print circulation to try a digital-first approach in May, but the experiment was short-lived.

The 49-year-old title, operated by Source Interlink Media's enthusiast GrindMedia division, is ceasing regular publication after the release of its current issue. All platforms will be shut down by October 15.

Norb Garrett, senior vice president and group publisher at GrindMedia, explained the rationale for the decision in a video on the brand's website. Garrett blames the skateboarding market rather than the performance of the digital magazine itself.

"We'd been, as you have, super stoked on everything we'd been doing digitally with the magazine in the last three issues-growing audience, expanding to over 180 countries-and just done a great job with just leading first with digital," he says. "So the decision today has nothing to do with whether the digital mag was working or not. It really has everything to do with how the business is, unfortunately. The business, overall, in the skate industry, as you guys all know, is super tough right now."

Despite the challenges posed by the industry however, GrindMedia will continue to publish TransWorld Skateboarding. Garrett hinted at the possibility of special collaborative projects between the two titles in the future.

It's the third time Skateboarder Magazine has shut down‚ÄĒonce in late 1960s before coming back in 1975, and then again in the 1980s before returning in 1999.

Justice says the decision to close Skateboarder was unrelated to the recapitalization deal.

*Editor's note: This story was updated to include comments from Stephanie Justice.  

 

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Michael Rondon By Michael Rondon
08/21/2013







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