Continuing its interactive shop roll-up, holding company Seneca Investments is merging what is left of Red Sky Interactive with Agency.com,
as the smaller firm prepares to liquidate.
On Monday, Red Sky’s attorneys and creditors plan to file a joint plan of liquidation, which will lay out the process of distributing Red Sky’s assets to unsecured creditors.
The company first filed for bankruptcy protection in July, citing numerous debts, including one to the Internal Revenue Service for about $2 million. All in all, Red Sky owes money to about 500 different firms, ranging from landlords to software vendors to phone companies.
That payout will be made easier, thanks to an offer by Seneca to forgive the $15 million it is owed by the agency — a debt that had been originally owed to ad agency holding company Omnicom Group,
but which Seneca took over as part of its incorporation. (Omnicom formed Seneca earlier this year in partnership with venture capital firm Pegasus Partners, in an effort to spin off its Communicade portfolio of Internet companies.)
“It won’t be a big distribution … but there should be a distribution,” said attorney Marilyn Simon of Marilyn Simon & Associates, which represents Alley-based Red Sky. “One of the advantages of the deal as proposed by Seneca is that [Communicade] agreed to waive its secured claim … and that will allow funds to be distributed to the unsecured creditors.”
After the IRS and other so-called “priority creditors” have been paid off, Red Sky’s numerous unsecured creditors will receive their share of the company’s liquidated assets.
However, Seneca’s offer comes at a price — Red Sky must merge with publicly traded Agency.com, which is likely to be bought out by Seneca before the end of the year.
Already, the merger is underway. Agency.com confirmed that it now manages Red Sky’s intellectual capital and client relationships. Some Red Sky employees, additionally, were offered positions at Agency.com.
According to the company, the Red Sky brand will continue in some form, although specifics are not yet known.
Meanwhile, Agency.com is edging closer to going private. Earlier this week, Seneca finalized its purchase of shares held by the agency’s founders, giving it control of 65 percent of the firm. A shareholder meeting is scheduled for later this year, during which two-thirds of shareholders must vote to sell their shares to Seneca for the holding company to make good on the buyout.
And, as with Red Sky, difficulties have accompanied Agency’s realignment under Seneca.
Company spokespeople said they couldn’t speak to reports from anonymous sources that Agency.com had planned to reduce underutilized staff in its lower Manhattan headquarters during the week of the World Trade Center attack. Those sources told internetnews.com that Agency.com then scrapped those plans in order to save face, and since then has put the employees slated for termination on pro bono accounts. (However, the firm announced on Sept. 18 that it did cut 200 from other offices across the company, and shuttered its Portland operations.)
The firm did confirm that the New York office had indeed taken on a number of non-profit clients, but said this wasn’t related to a need to avoid layoffs. Instead, Agency said the firm had created an information site aimed at helping children cope with the aftermath of the attacks, and that the firm also was seeking the federal government’s official blessing for an interactive memorial that it had designed.
“This company’s always done a lot of stuff around pro bono,” said a spokesperson. “We wanted to use our expertise to make an impact for people. Utilization is down for a lot of companies like us, and we’re using the fact that our utilization is down on client work to take care of some of those pro bono projects.”