Appellate Division Confirms Reorg Research Journalists Have Benefit of Shield Law

You may have heard about an important case between Reorg Research and Murray Energy. The case was a potential landmark for journalists and media organizations in New York and beyond. We fought like hell to protect what we knew was right.

Today, we won. 

Here is a link to the opinion: Reorg Murray Decision.

In a unanimous 5-0 decision, the First Department Appellate Division of the New York Supreme Court ruled that Reorg Research’s editorial team is protected by New York’s Shield Law from being compelled to disclose the identities of its confidential sources.

The court held that “because it is a ‘professional medium or agency which has as one of its main functions the dissemination of news to the public,’” Reorg has the benefit of the shield law and is exempt from having to comply with Murray Energy’s request that it reveal its sources.

The decision arose from a “pre-action disclosure petition” that Murray Energy filed with the New York Supreme Court in September after Reorg Research published two stories that reported Murray’s financial results and an agreement between the company and one of its labor unions.

The court noted that while Reorg has a “relatively limited subscriber base” that pays “relatively high” subscription fees and agrees to limited restrictions on further dissemination of its stories, these features are “not uncommon” in today’s media landscape and that the result of ruling in Murray’s favor “is not broader coverage but no coverage at all.”

In a coda likely to resonate far beyond the distressed debt community, the court ended its opinion by noting that “[e]xtending protection to [Reorg] under the Shield Law is consistent with New York’s ‘long tradition...of providing the utmost protection of freedom of the press’” and “[t]o condition coverage on a fact-intensive inquiry analyzing a publication’s number of subscribers, subscription fees, and the extent to which it allows further dissemination of information is unworkable and would create substantial prospective uncertainty, leading to a potential “chilling” effect.”

I want to thank our amazing team at Davis Wright Tremaine, the amici, our general counsel Jude Gorman and finally, the amazing team of journalists and contributors at Reorg who day in and day out, provide the world's most comprehensive and in-depth coverage of the high yield and distressed debt market.




A Better Way to Read SEC Filings on Reorg Research

One thing that we constantly try to do at Reorg Research is look at how the buy side, bankers, traders and lawyers are consuming source information through other channels, platforms and mediums and improve upon those functionalities. We started in 2013 doing this around legal and bankruptcy filings. We now do it across a wide variety of data sets. For instance, this week we released a new and improved way for our subscribers to access SEC filings on Reorg:

You can access any SEC filing on Reorg Research and get instant alerts on any company out there (distressed or not distressed). You can run a full text search across all our data sets to find the information you need faster.

If you are a subscriber, you can access the SEC Filings portal here: SEC Filings on Reorg Research. If you aren't a subscriber and want to learn more, you can request a trial for the product here: Reorg Research Trial Request



Official Launch of Reorg Covenants

As many of you know, last year we rolled out a beta of Reorg Covenants. We saw a void in the market for a product that combined subject matter expertise around complex capital structures, whether it be a high yield or investment grade credits, along with innovative technologies that would make the analysis of indentures, credit agreements and other debt documents more efficient, effective and intuitive.  

After amazing feedback from our beta participants, I believe we have built the best product on the market so market participants and their advisers can better know and understand the inherent risks and pitfalls of a particular credit or debt instrument. Names (and links to some our recent coverage) include: 
If you are interested in trying out the product, please fill out the trial request form here: Reorg Covenants Trial Request

In addition, here is a press release with the official announcement: Reorg Covenants Press Release

As always, if you have any questions on the product or Reorg in general, feel free to reach out.



Join Reorg Research at the 13th Annual Wharton Restructuring and Distressed Investing Conference

As in years past, Reorg Research will be acting as a Media Sponsor at this year’s Annual Wharton Restructuring and Distressed Investing Conference, which will take place at New York City’s Plaza Hotel on Friday, February 24.

The schedule is jam-packed with exciting restructuring panels, case study presentations and keynote speaker discussions including appearances from James G. Dinan, Founder, Chairman and CEO of York Capital Management and Glenn R. August, Founder and CEO of Oak Hill Advisors. Lastly, we can expect a final keynote interview of the day between Millstein & Co.’s Jim Millstein and Former Governor of Puerto Rico, Alejandro GarcĂ­a Padilla.

We hope to see you at the 13th Annual Wharton Restructuring and Distressed Investing Conference. Please use Reorg’s discount code “WRDIC2017MEDIA” to receive 15% off your registration fee.



Reorg First Day Covers Gawker Media

Last year, Reorg Research launched Reorg First Day which is definitively the best way for investors, advisers or lawyers to stay on top of new bankruptcy filings across the United States. The product gives a detailed overview of the first day pleadings on all cases with more than $10M in liabilities. This is invaluable information for distressed funds looking for off the run cases, private equity funds looking for 363 sales or sales of entire businesses / divisions or lawyers and looking for engagements across the creditor stack.

Below is Reorg First Day's coverage today of the Gawker Media bankruptcy filing, which we are providing to the broader community due to the intense public interest in the case (This is Part II of a two part series). To learn more about Reorg First Day or to request a free trial, click HERE or email firstday [at] reorg-research.com.​


As discussed in Part IGawker Media, the online media company embroiled in a long-running legal battle with Terry Gene Bollea, also known as Hulk Hogan, filed chapter 11 on Friday after the Florida court overseeing Bollea’s sex tape lawsuit ruled that it would allow the plaintiffs to begin executing the $140.1 million judgment, $130 million of which is attributable to Gawker, by securing liens on the debtors’ property. The lawsuit stems from Gawker’s publication of a voyeuristic home video recorded by Hogan’s erstwhile best friend, former Sirius/XM shock jock Bubba the Love Sponge. The video depicted a romantic encounter between Hogan and the Love Sponge’s wife. In this piece, we will address Gawker’s request for first day relief.

Gawker intends to sell the company “quickly” through a 363 process, having entered into an asset purchase agreement with stalking horse bidder ZDGM, which is an affiliate of Ziff Davis, a subsidiary of j2 Global (Nasdaq: JCOM). ZDGM’s bid is for $90 million plus the assumption of certain liabilities, but excluding the Bollea judgment. According to several news outlets including Reuters, during Bollea’s trial, the jury was told in late March that Gawker Media was valued at $83 million.

Gawker also requests $22 million in DIP financing from Cerberus Business Finance, consisting of a $17 million term loan and a $5 million revolving credit facility. The DIP would be used to roll up all of the company’s outstanding obligations under its prepetition first lien credit agreement.

The company’s prepetition capital structure includes:
  • Secured debt:
    • First lien term loan: Silicon Valley Bank: $6.2 million, plus $5.3 million for a posted but undrawn letter of credit
    • Second lien term loan: US VC Partners: $15 million
      • Credit agreement provides for a 25%, or $3.75 million make whole
  • Intercompany debt: $13 million owed to Kinja and $250,000 owed to GMGI
  • Unsecured debt:
    • Litigation claims: more than $250 million
  • Equity: GMGI is privately held, with Denton as the largest shareholder. A list of GMGI’s equityholders is HERE.

Also discussed in Part I, Gawker filed an adversary proceeding requesting injunctive relief to enjoin various litigations against the company’s founder, CEO and president, Nick Denton and Gawker’s former editor-in-chief, A.J. Daulerio (the author of the Bollea story), including a request that Bollea be temporarily restrained and enjoined from enforcing the judgment as against Denton and Daulerio. The jury awarded $140.1 million, with Denton and Daulerio each jointly and severally liable on $115 million of the judgment, and an additional $10 million and $100,000 of punitive damages assessed against Denton and Daulerio, respectively. The bond to stay execution of the judgments pending appeal is $50 million for each of the Bollea litigation defendants. In addition to refusing to reduce the cash bond and denying Gawker’s request to post stock or alternative collateral in place of the bonds, the Florida court made the judgments available for execution as of FridayThe bankruptcy court entered a temporary restraining order and scheduled a conference on the adversary proceeding before Judge Bernstein on Wednesday, June 15, at 11 a.m. EDTAt the June 15 conference, the court will address scheduling matters in connection with the motion, including scheduling an evidentiary hearing.

Gawker Media’s parent, Gawker Media Group, Inc., and subsidiary, Kinja Kft., based in Budapest, Hungary, filed petitions on Sunday night. Kinja owns the proprietary publishing and discussions platform and intellectual property used by Gawker Media’s brands and websites. Gawker Media has an exclusive license of these assets as well as intercompany arrangements with Kinja to enable the affiliates to maximize use of their complementary assets and employees.

The case representatives are as follows:

DIP Financing

Gawker requests $22 million in DIP financing, consisting of a $17 million term loan and a $5 million revolving credit facility, with Cerberus Business Finance as agent, and Cerberus or one or more of its affiliates as lenders. The debtors request $14 million on an interim basis, including $12.3 million to repay all outstanding obligations under the prepetition first lien credit agreement and cash collateralize outstanding letters of credit in an amount equal to 105% of the letter of credit.

The financing bears interest of LIBOR + 8% (with a 1% LIBOR floor) or the “Reference Rate” plus 7% (subject to a 3% floor). During an event of default, 2% would be added. In addition, the DIP loan is being issued with a 4% original issue discount. The loan also includes a 2% commitment fee and a 0.75% unused line fee.

The loan matures on the earliest of 12 months after entry of the interim order, substantial consummation of a plan of reorganization and the sale of substantially all of the debtors’ assets.

The debtors’ 13-week cash flow can be found HERE.

The DIP would prime the liens of the second lien facility, with the second lien lender’s consent. By virtue of the $90 million stalking horse bid, the debtors say that the first lien lenders’ claims are “significantly” oversecured.

Adequate protection for the second lien lenders includes replacement liens and superpriority administrative expense claims (to attach to avoidance actions subject to the final order).

The loan is subject to the following milestones:
  • First day orders: entered by June 16
  • Final DIP order: entered within 30 days of interim DIP order

The DIP agent would have the right to credit bid.

Changes of control include if GMGI no longer has beneficial ownership of 100% of the voting power of the equity interests in the debtors.

The lien challenge period for the official unsecured creditors committee or any other party in interest would be 60 days from entry of the final DIP order.

The post-default carve out for professionals’ fees (excluding success or transaction fees) is $500,000.

The debtors also filed the declaration of William Holden in support of the DIP financing.

Sale Process

The debtors’ prepetition marketing process began with the retention of Houlihan Lokey on May 16. After targeting six potential stalking horse bidders and receiving two term sheets, Gawker entered into an asset purchase agreement with stalking horse bidder ZDGM, an affiliate of Ziff Davis, for a purchase price of $90 million plus the assumption of certain liabilities (excluding liabilities relating to the Bollea litigation), subject to certain adjustments. The debtors say that press reports on a potential sale have “generated additional inbound interest from strategic parties.”

The asset purchase agreement, which the debtors seek to assume, allows the buyer to terminate the agreement if the following deadlines are not met:
  • Bid procedures/APA assumption order: entered within 21 days of petition date
  • Sale order: entered within 60 days of petition date, and becomes final within 75 days of petition date

Gawker or the buyer may terminate the APA if the closing has not occurred within 120 days of the date of the agreement.

The debtors propose a breakup fee of $2.475 million (2.75% of the purchase price) and an expense reimbursement up to $1.25 million. In addition, if the APA is terminated by the stalking horse buyer under certain circumstances, then the buyer would be entitled to $13.5 million in liquidated damages.

Bids must include a 10% deposit. Initial overbids must exceed the stalking horse bid, the breakup fee, the expense reimbursement, plus $1 million. Subsequent overbids are $1 million.

The debtors entered into a consulting agreement with Denton, dated June 10, pursuant to which Denton would serve as consultant and advisor for 24 months after the closing date, for a monthly fee of $16,666. In addition, the APA also includes what the debtors describe as a “limited no shop” provision.

The stalking horse agreement provides for the purchase of all avoidance actions.

The debtors propose the following sale timeline:
  • June 27 at 4 p.m. EDTBid procedures objection deadline
  • July 5 at 10 a.m. EDT: Bid procedures hearing
  • July 11: File and serve cure notice
  • July 25 at 4 p.m. EDTPreliminary bid deadline
  • July 27 at 5 p.m. EDTBid deadline
  • July 28: Deadline to designate qualified bidders
  • July 29 at 10 a.m. EDT: Auction
  • Aug. 3 at 10 a.m. EDTSale hearing

A hearing on the bid procedures motion is scheduled for July 5, at 10 a.m. EDT, with objections due by June 27, at 4 p.m. EDT. A sale hearing has been scheduled for Aug. 3, at 10 a.m. EDT, with objections due by July 25, at 4 p.m. EDT.

Adversary Proceeding for Preliminary Injunction

Gawker has filed a motion to preliminarily enjoin the actions as against Denton and the individual defendants that are current or former employees of the debtors pending termination of the automatic stay to stay the actions as against these parties. In addition, Gawkerrequests that the Bollea lawsuit be enjoined against Denton and Daulerio, Gawker’s former editor-in-chief.

Gawker also filed a memo of law in support of the motion for a preliminary injunction and for a TRO, the declaration of CRO William Holden and the declaration of Michael Winograd, counsel with Ropes & Gray.

The debtors explain that the Florida state court entered a judgment that provides, “let execution issue forthwith.” (emphasis in original). Gawker seeks the injunctive relief to avoid enforcement of any judgment against Denton and Daulerio, because it says that would trigger “crippling” indemnification obligations for the debtors, as Denton is fully indemnified by the debtors in connection with the litigation judgments. Gawker also says that at least one of the other individual defendants, Ms. Darbyshire, has similar contractual indemnity rights, and that the remaining individual defendants, plus Darbyshire and Denton, are subject to a company practice and policy of indemnification. Further, according to the filings, execution of the judgment against Denton would drive him to file for personal bankruptcy.

The debtors say that in the “unlikely event” that Denton would not file for personal bankruptcy failing granting of the requested injunctive relief, that his assets “undoubtedly would be seized immediately” to satisfy the Bollea judgment. Gawker continues that because Denton’s assets are substantially comprised of his stock in Gawker Media Group, Inc., Gawker Media’s parent, “Bollea would become a substantial owner of GMGI, thereby defeating the Debtor’s chance at a successful reorganization.” This would be an “especially inequitable result”, Gawker asserts, because the Bollea litigation is subject to an appeal and Bollea only holds a contingent, unliquidated litigation claim. Further, the debtors add, “the driving force behind the Bollea Litigation is Peter Thiel, a billionaire investor, who holds a personal vendetta against the Company and has publicly admitted that he funded the Bollea Litigation, and other lawsuits against Gawker to (as the New York Times reports) ‘try to put the media company out of business.’”

Critical Vendor Motion

The debtor seeks approval to pay up to $365,000 to critical vendors on a final basis, with $95,000 sought on an interim basis, and up to $20,000 in foreign critical vendor claims. The names of the vendors are not disclosed in the filings but consist of companies that provide advertising operations, IT and hosting, editorial services, specialized campaign services and general and administrative services.

Other Motions

In addition to the motions described above, Gawker Media also filed various standard first day motions, including the following:
  • Motion for Joint Administration
    • The cases will be jointly administered under case No. 16-11700 (SMB).
  • Motion to Pay Employee Wages and Benefits
    • Gawker has approximately 102 full-time and part-time employees, Kinja has 25 employees that provide technology and programming, editorial and administrative services, and parent, GMGI, does not have any employees. The debtors also employ approximately 160 independent contractors and one temporary employee.
    • All of Gawker’s full-time and regular part-time non-executive editorial employees, representing 102 workers, are members of the Writers Guild of America, East and party to a collective bargaining agreement withGawkerThe debtors have approximately $136,239 in severance obligations outstanding as of the petition date.
    • Gawker requests approval to pay up $1.7 million in prepetition employee obligations on a final basis, with $881,000 on an interim basis.
  • Motion to Use Cash Management System
    • The company has bank accounts with Silicon Valley Bank and K&H Bank in Hungary. There is approximately $2.97 million in an operating account at Silicon Valley Bank.
    • Gawker intends to make up to $150,000 in monthly postpetition intercompany transfers to Kinja. However, Gawker does not intend to make payments during these cases with respect to $10.9 million in accounts payable due from Gawker to Kinja on account of a master license agreement and services agreement, on account of $13 million in issued promissory notes between Gawker and Kinja, or on account of a $250,000 promissory note with GMGI.
    • The debtors also seek to pay approximately $100,000 owed with respect to an American Express credit card account.
  • Motion to Maintain Insurance Programs
  • Motion to Pay Taxes and Fees
    • The debtors seek approval to pay up to $45,000 in property taxes and $67,300 in various Hungarian taxes on a final basis, with $45,000 and $20,000 sought, respectively, on an interim basis.
  • Motion to Provide Utilities with Adequate Assurance
  • Motion to Extend Time to File Schedules to July 14
  • Motion to Establish Case Management Procedures

A hearing on the motions has not been scheduled yet.

See on Reorg Research



hunter [at] distressed-debt-investing [dot] com

About Me

I have spent the majority of my career as a value investor. For the past 8 years, I have worked on the buy side as a distressed debt and high yield investor.