Gawker Media files bankruptcy, eyes asset sale and lawsuit injunction

By Caroline Salls

Pittsburgh, June 10 – Gawker Media, LLC filed Chapter 11 bankruptcy Friday in the U.S. Bankruptcy Court for the Southern District of New York amid plans to sell substantially all of its assets.

Gawker Media Group said in a news release that it has entered into an asset purchase agreement to sell its seven media brands and other assets to Ziff Davis.

During the sale process, Gawker said it will maintain normal operations.

The company said the sale and bankruptcy filing are intended to preserve the value of its digital news business, safeguard the jobs of journalists and other staff and allow it to fund the appeal of a $130 million judgment in the Hulk Hogan case against the company in a Florida state court.

The company said in its bankruptcy petition that it obtained a commitment for debtor-in-possession financing, with $22 million to be initially available.

The terms of the asset sale agreement and DIP financing had not yet been filed as of Friday evening.

On Friday, Gawker filed a complaint against Meanith Huon, Ashley Terrill, Teresa Thomas, Shiva Ayyadurai, Terry Gene Bollea, Charles C. Johnson and Got News LLC that seeks an injunction halting six lawsuits filed by the defendants in an effort to protect company founder, president and chief executive officer Nick Denton and some current or former Gawker employees.

“The actions are stayed as against the debtor by section 362(a) of the Bankruptcy Code,” the company said. “The actions likewise should be enjoined or otherwise stayed as against Mr. Denton and the individual defendants because if the actions are allowed to proceed they will significantly interfere with or otherwise impair the debtor’s efforts to reorganize, including specifically the debtor’s plan to sell substantially all of the debtor’s assets to preserve value for distribution to creditors.”

Specifically, the company said the lawsuits would give rise to indemnification claims, which would have to be paid from funds that would otherwise be available to Gawker for the administration of its estate and the distributions to creditors.

In addition, Gawker said the lawsuits would have a chilling effect on employees and, as a result, on the company’s ability to continue to generate revenue on an ongoing basis; be a significant burden and distraction for Denton and other key personnel; and be prejudicial to the company in its own defense of the actions.

According to court documents, Gawker has $50 million to $100 million in assets and $100 million to $500 million in debt.

The company’s largest unsecured creditor is Terry Gene Bollea of Beverly Hills, Calif., with a $130 million disputed litigation claim.

The company is represented by Ropes & Gray LLP.

Gawker is a New York-based online media company. The Chapter 11 case number is 16-11700.

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