On the Eve of Comdex, Key3Media Teeters
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Executives at Key3Media, an IT trade show and conference producer, announced Thursday evening it would restructure its operations after next week's Comdex exhibition ends, and indicated Chapter 11 bankruptcy as one of the options.
While officials were not available at press time, the company's third quarter results included a reason for the decision to restructure: while Key3Media was able to meet its financial obligations to creditors for this quarter, it would likely not be able to meet next quarter's payment.
Key3Media also declined to hold a conference call on its third quarter results, likely because it did not want to field questions about its restructuring.
Citing the money coming into this year's Comdex was not enough to support the costs incurred to set up the show, executives said "there is a substantial risk that (we) will be unable to pay the interest payment on its senior subordinated notes due on Dec. 16...(we) believe this process represents the best alternative in these difficult times for preserving the value of its brands and businesses for its stakeholders and maintaining continuity of services to its exhibitor and attendee clients."
Last month, the company shuttered its Massachusetts office and scaled back its regional Comdex shows to focus on the national show.
This hasn't been a good year for Key3Media: for the first nine months of this year, it had earnings before interest, taxes, depreciation and amortization (EBITDA) revenues of negative $299.6 million and a net loss of $686.2 million.
The huge loss is accounted to new financial standards established by the Securities and Exchange Commission (SEC), which calls for more details in its reports from publicly traded companies. As a result, Key3Media recorded a $344.6 million charge in the first quarter and $315.6 million charge in the third.
The Chapter 11 bankruptcy threat as a bargaining tool with creditors to adjust payment contracts is being used with success at one of the largest telecom providers in the U.S. WorldCom, which is going through the largest bankruptcy in U.S. corporate history, is expected to come out of its Chapter 11 proceedings with a significantly decreased debt load and a clean bill of health to resume its business; this, after inflating billions of dollars in revenues.