Wipro’s Huge Contentious Role in Vice Media’s Bankruptcy: Impact and Restructuring: 2023

Moving to unravel the Wipro factor, how their actions catalyzed vice media Bankruptcy. According to the filings of Vice Media Group LLC, an American-Canadian digital media and broadcasting company, Indian IT major Wipro’s involvement actions may have played a role in Vice Media’s decision to file for Bankruptcy .

With 35 offices worldwide, Vice Media was recognized as the largest independent youth media company globally. However, the media group now finds itself owing Wipro a significant sum of $9.9 million due to an arbitration award, making Wipro the largest unsecured creditor of Vice Media.

Vice Media Group has taken the step of filing for Chapter 11 protection on May 15 in a bankruptcy court located in New York. The company’s financial situation is marked by $834 million in debt and $350 million in assets.

According to Vice’s Chief Restructuring Officer, Frank Pometti, the company’s growth and operational costs were sustained through external sources of funding, including both debt and equity.

However, this approach has led to a heavily leveraged and intricately structured capital framework, placing a significant burden on the company.

Nevertheless, despite the financial challenges the company was experiencing and the imminent possibility of bankruptcy, it is important to acknowledge that there were two contributing factors that ultimately led to this outcome. Notably, one of these factors was Wipro.

Providing context, a spokesperson from Vice had previously informed Insider in February that the awarded outcome stemmed from an unsuccessful outsourcing arrangement that Vice had ended approximately three years ago.

In March, Wipro was granted a favorable ruling by the arbitrator, resulting in a financial award of approximately $7.9 million, which includes an interest rate of 9 percent.

Consequently, the total amount awarded to the IT firm reached close to $9.9 million. Seeking further legal action, Wipro subsequently pursued the matter in the Supreme Court of the State of New York and obtained a judgment pertaining to the arbitration award on May 4.

The subsequent day marked the initiation of implementing the ruling as a restraining notice was promptly issued to Vice.

As a result of this notice, Vice encountered significant impediments in terms of accessing its funds and engaging in any form of asset disposal.

According to the research conducted by Pometti, the aforementioned circumstances resulted in a subsequent increase in defaults.

On May 10, Wipro contacted JPMorgan Chase (JPMC), Vice’s main bank, presenting a restraining notice akin to the one issued to the media company a few days earlier. The purpose was to temporarily freeze the account until the outstanding payments could be settled.

According to the filed document, the notice aimed to halt any withdrawals from Vice Media’s accounts at JPMC, the financial institution. Pometti, the individual mentioned in the filing, stated that the account contained more funds than necessary to fulfil the requirements stated in the notice.

Pometti further explained that JPMC had frozen the Vice Media accounts until a court order is obtained to determine who has control over the funds.

The freeze, as mentioned in the document, has effectively restricted Vice’s access to a significant portion of their available funds, impacting their liquidity.

The borrowers are deeply concerned about the lack of available funds, particularly considering their heavy reliance on the invaluable services provided by freelance professionals and independent contractors.

Moreover, given the global scope of the Company’s operations, it becomes imperative to maintain sufficient liquidity in order to facilitate uninterrupted operations of non-debtor foreign subsidiaries as they conduct their regular business activities,” stated the document submitted.

At present, Vice is seeking authorization to utilize the resources within this particular account. This request arises amidst Vice’s ongoing hardships and financial difficulties.

Wipro, among numerous other firms, had resorted to legal measures against Vice due to the company’s substantial outstanding debts to various vendors.

Wipro, being Vice’s largest unsecured creditor, is not the sole entity to whom the media company owes money. Other organizations such as CNN Productions, Ernst & Young, HBO, Adobe Systems, and Amazon Web Services are also owed financial obligations by Vice, demonstrating a wide range of creditors involved in this matter.

In addition to Wipro, Vice encountered another noteworthy occurrence with its collaboration alongside Antenna Group, a key founding partner of Vice World News (VWN). The agreed-upon terms of this partnership involved Vice receiving a substantial quarterly payment of $34 million.

However, to their surprise, Vice received notification stating that the partnership was abruptly coming to an end, thus nullifying the anticipated financial arrangement.

The termination of the VWN relationship had a significant impact on all aspects of VICE’s operations, as stated in Pometti’s filing. Consequently, Vice found it necessary to request forbearance for its loans, underscoring the far-reaching consequences of the termination.

Wipro’s lack of response to Moneycontrol’s inquiries during the time of publication remains unanswered. In the event that the company does provide a response, the article will be revised accordingly.

On May 15, Vice made a significant announcement regarding an asset repurchase agreement reached with a consortium of lenders. This development marks a notable decline for a company that was previously valued at an impressive $5.7 billion.

Based on information provided by Vice, a consortium comprising of Fortress Investment Group, Soros Fund Management, and Monroe Capital has committed to submitting a credit bid of $225 million for “substantially all of the company’s assets, along with assuming considerable liabilities upon completion.”

Published By Naveenika Chauhan