BuzzFeed Is Facing a $124 Million Debt Crisis

The digital media company BuzzFeed Inc., which owns BuzzFeed, HuffPost, and the properties Tasty and First We Feast, is facing a potential $124 million debt crisis related to funds it raised in June 2021 to finance its acquisition of Complex Media. According to the contract governing the deal, the creditors who lent BuzzFeed the money more than three years ago have the right to require the publisher to repurchase the debt, plus interest, beginning Tuesday, Dec. 3. BuzzFeed used a portion of the cash generated from its sale of Complex this February to pay down the loan, but it still owes $123.5 million—$118.8 million of principal debt and $4.7 million of accrued interest, according to public filings. If these creditors demand that BuzzFeed repurchase the loans in their entirety, BuzzFeed would not be able to do so, which could force the publisher to take drastic action to raise the funds or potentially declare bankruptcy. “We currently do not have sufficient cash on hand or projected cash flows to fund the repayment of the notes,” the company said in its third-quarter earnings report. BuzzFeed declined to comment on the matter. At the moment, no creditors have filed to demand repurchase. Under an update to the contract made on Oct. 28, BuzzFeed will have five days to repay a creditor once they have submitted their “put notice.” What is most puzzling, however, is the lack of communication from the company, according to Robert Berstein, the managing director at the advisory firm JEGI Clarity. With this crucial date approaching and now having arrived, BuzzFeed has yet to offer any guidance to the market as to how it plans to navigate the situation. “Not having an answer to this problem is somewhat disturbing,” Berstein said. “For them to kick the can down the road like this is atypical.” Consider the options While the situation is serious, BuzzFeed has several options left at its disposal. The publisher raised funds in February when it sold Complex for $108 million, and it can sell off other assets to generate further cash. Furthermore, the company has floated the sale of its food property First We Feast, which houses the interview series Hot Ones, for $70 million, according to Bloomberg. Whatever the price, if BuzzFeed sold First We Feast, it would have to use the proceeds to pay down the debt. An update to the contract between BuzzFeed and its creditors in February stipulated that 95% of the funds generated by future asset sales must be used to repay the debt. If BuzzFeed were able to sell one of its properties, the windfall would likely encourage creditors to continue working with the publisher to pay down the remaining debt, according to Berstein. In fact, BuzzFeed’s creditors have little incentive to bankrupt the company, as doing so would jeopardize their ability to recoup their investment. That leads to the second option: restructuring the debt or finding alternate financing. BuzzFeed could refinance its debt obligations to its creditors by extending the timeline, accepting new terms, raising more money, or exploring other options, according to Berstein. Stocking stuffer Finding new capital partners interested in investing in BuzzFeed could prove difficult given its challenged financial position, but the company has reason for some optimism. BuzzFeed’s stock, which sank from its initial offering in 2021 of $10 per share down to below $1, has rebounded to a year-to-date high of around $4.50. This uptick could be the result of a variety of factors. In May, the entrepreneur and politician Vivek Ramaswamy took a 7% equity stake in the company, which could engender confidence in the business. The uptick could also be related to the fact that BuzzFeed has tied its new identity to its use of artificial intelligence, a buzzy technology that has attracted billions in investment in recent years. BuzzFeed also reported a small quarterly profit in the third quarter, with revenues up 53% year over year. While nascent, the positive financial news is a welcome green shoot for the embattled publisher. Whatever the explanation, the uptick in BuzzFeed stock could provide the publisher with a degree of bargaining power in debt restructuring conversations. Likewise, the economic outlook—especially as it pertains to mergers and acquisitions—is trending in a positive direction for a variety of reasons, giving BuzzFeed a healthier shot at being able to maneuver its way into solvency. “BuzzFeed is definitely drafting off by far the best place the market has been in the last 24 to 30 months,” Berstein said. “They may feel slightly emboldened because of that.”

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BuzzFeed Is Facing a $124 Million Debt Crisis

And it doesn’t have the money to pay it

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Mark Stenberg

Media

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