SFX Files For Bankruptcy, Sillerman to Be Replaced as CEO

Robert F.X. Sillerman
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Robert F.X. Sillerman rings the NASDAQ closing bell at NASDAQ MarketSite on Oct. 9, 2013 in New York City. 

Robert Sillerman will remain the company's chairman as the search begins for a new Chief Executive to turn around the EDM powerhouse.

EDM promoter SFX announced Monday is has filed for Chapter 11 reorganization in order to restructure is debt. Robert Sillerman will be replaced as CEO but will remain chairman of the company.

The company says it will to eliminate "more than $300 million" of its $490 million of debt in part by turning the majority of bondholder debt into equity. It also expects the restructuring will provide "significant working capital" that should help the incoming CEO revive the company. Michael Katzenstein, of FTI Consulting, Inc. is serving as SFX's Chief Restructuring Officer. Greenberg Traurig, LLP is its legal advisor. Moelis & Company is its investment banker.

SFX stresses that its operations will not be impacted by the bankruptcy proceedings. "Of course this was not where we thought we’d be but with this restructuring we have the opportunity to achieve all that SFX can and will be," Sillerman said in a statement. None of the company's foreign subsidiaries are included in the bankruptcy. Beatport, SFX's download and streaming service, released a statement its operations and payments to suppliers "are going on in their usual manner."

The bankruptcy filing sheds light on SFX's financial situation. Its largest unsecured debts are unpaid amounts, called deferred purchase price payments, related to the acquisitions that built the company. The third-largest debt is a $7 million settlement of a suit brought against Sillerman regarding the creation of the company. The plaintiff alleged Sillerman took the idea for the company but never gave them equity in the company. SFX went on to raise $260 million in a 2013 initial public stock offering.

The company also owes more typical trade expenses. Additional debt includes $328,000 to the performance rights organization PRS For Music, $314,000 to Facebook, $301,000 to Front Gate Ticketing, and $270,000 to event medical service CrowdRX.

Shares of SFX were down 52.4 percent to 6.2 cents in early Monday trading.