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How Vice Media, Once Valued at $5.7 Billion, Went Through Financial Crises and Declared Bankruptcy

Vice raised both debt and equity capital through external funds but it struggled to generate enough revenue to offset its expenses.
Cover Image Source: Getty Images | Mario Tama
Cover Image Source: Getty Images | Mario Tama

Vice Media, the once-prominent digital media company, made headlines when it filed for Chapter 11 bankruptcy in May 2023. The company's financial situation had been deteriorating over the years and new documents revealed the extent of its struggles. With over $1.3 billion in debt and equity financing since 2017, Vice Media was consistently battling cash deficits, per ADWEEK. Vice Media went bankrupt due to its excessive debt load, failed attempts to sell itself, and a disastrous financial episode from which it couldn't recover.

Early and increasing debt load

Vice Media's downward spiral began in 2017, despite raising $400 million in equity financing. The company's rapid growth and hefty capital expenditures forced it to seek fresh capital repeatedly. Through the following years, Vice raised both debt and equity capital through external funds but it struggled to generate enough revenue to offset its expenses, leading to a cycle of debt and equity financing to fuel its operations.

Image Source: GettyImages/Mario Tama
Image Source: Mario Tama/Getty Images

Exploring a sale

In a desperate bid to alleviate its financial woes, Vice Media decided to explore a potential sale of the company. Initially, they considered selling off specific divisions, such as Vice Studios and ad agency, Virtue, but eventually shifted focus to selling the entire business. However, despite raising more capital through shareholder loans, Vice's efforts to find a buyer proved unsuccessful.

Forbearance and debt obligations

As the December 2019 loan reached maturity and Vice was unable to pay it, the company found itself in default, triggering penalties and increased interest rates. In an attempt to buy more time, Vice entered several forbearance agreements to extend payment timelines. However, as discussions with potential buyers faltered, Vice's financial situation grew increasingly dire, resulting in additional cash shortfalls. These led to more debt, compounding Vice's already substantial outstanding obligations.

Image Source: GettyImages/Matt Cowan
Image Source: Matt Cowan/Getty Images

Vice World News collapses, and Vice declares bankruptcy

Vice World News, a vital revenue source for the company (in 2022, it generated $134 million) suffered a major setback when the primary commissioner of its content failed to provide a $34 million payment in January 2023. This left Vice in dire need of cash, leading to negotiations with the commissioner, which ultimately resulted in a $50 million payment to terminate the contract. However, Vice needed more funds to stay afloat during this period of uncertainty, leading to an additional $60 million loan.

Image Source: GettyImages/	Mario Tama
Image Source: Mario Tama/Getty Images

Despite these efforts, the financial blow proved to be fatal for the company. On April 27, 2023, Vice was forced to shut down Vice World News, leading to the loss of over 100 jobs. Severance payments for affected staff were delayed, creating further tension and dissatisfaction. Amidst this turmoil, Vice awarded substantial bonuses to 11 executives, drawing public criticism and intensifying the company's woes.

Days later, Vice faced another blow when a legal judgment filed by a creditor froze its accounts with JPMorgan Chase, effectively cutting off access to cash. With no other options, Vice Media filed for Chapter 11 bankruptcy on May 15, 2023. The once-thriving company, valued at $5.7 billion, is now in the midst of a court-supervised sales process, where it could potentially be sold for as little as $225 million.