By Dietrich Knauth
NEW YORK (Reuters) - Vice Media received court permission on Tuesday to borrow $5 million to fund its bankruptcy, saying it will use the money in part to pay freelancers and prepare the company for a sale.
U.S. Bankruptcy Judge John Mastando at a hearing in Manhattan said he would allow Vice to borrow additional money from its existing senior lenders, a group that includes Fortress Investment Group, Soros Fund Management and Monroe Capital (NASDAQ:MRCC).
Mastando said he would approve the first $5 million of the loan within a day, and that he would consider Vice's request to borrow an additional $5 million in June.
Vice attorney Kyle Ortiz said that approval of the bankruptcy loan would also unlock $20 million in a frozen bank account, as part of the lenders' agreement to fund Vice's bankruptcy. Vice will have more than enough cash to pay $2 million owed to freelancers and other pressing operational costs, Ortiz said.
Vice was among a group of fast-rising digital media ventures that courted millennial audiences and once had rich valuations. Along with contemporaries like Buzzfeed, Vice stumbled as advertising profits fell and interest rates rose.
The freeze of the company's bank account, which happened in the past week, accelerated its path toward bankruptcy after earlier setbacks, which included missed growth targets, the shutdown of the "Vice News Tonight" television broadcast, and company layoffs, Ortiz said.
Vice's bank, JPMorgan Chase (NYSE:JPM), froze a large account due to competing creditor claims asserted on May 10 by Wipro (NYSE:WIT), a tech services provider, and by the Fortress lender group that is providing Vice's bankruptcy loan.
Wipro recently won a $9.9 million judgment against Vice in an arbitration over a canceled services agreement, and it filed a restraining notice with JPMorgan. The Fortress lenders said that they had a greater right to the cash, as Vice's senior lenders, causing JPMorgan to freeze the account until the matter could be cleared up, according to Vice's court documents.
The Fortress lender group, owed $474.6 million, is pushing Vice toward a quick sale in bankruptcy, and it has offered to buy the company at a $225 million valuation.