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At a hearing on Thursday, U.S. Bankruptcy Judge Stuart Bernstein momentarily gave attorneys for Gawker Media a bit of a scare by refusing to allow Gawker to move forward with a plan to sell the media company. However, the judge has now signed off on the planned auction next month.
When Gawker declared Chapter 11 on June 10, after experiencing a $140.1 million final judgment in the Hulk Hogan sex-tape lawsuit, it was announced that Ziff Davis would be putting up $100 million and acting as the stalking horse bidder at a coming auction. If another company were to outbid Ziff Davis, under the sales plan, it would be required to pay millions over to Ziff Davis as a breakup fee plus expenses. The plan also allowed the stalking horse buyer to bow out under certain circumstances with $13.5 million in liquidated damages. The judge had some issues with that liquidated damages provision. So the hearing recessed until the attorneys came up with a solution. The provision was then revised so that liquidated damages would be Gawker’s liability and subordinated to the needs of unsecured creditors like Hogan, according to Reorg Research, an outfit that monitors bankruptcies.
The sale motion was hardly contested, although Hogan’s attorneys have made a limited objection over the highly technical issue of avoidance actions. Nevertheless, insiders expected it to be approved. The bigger controversy entails what has been happening in an adversary proceeding brought by Gawker against Hulk Hogan and other legal foes over whether collection efforts against Gawker publisher Nick Denton should be enjoined. Recently, a judge ordered Denton to be deposed while Hogan’s lawyers have raised other issues like a hidden $200,000 loan by Gawker to Denton on the eve of bankruptcy.
As for the auction, at today’s hearing, a restructuring advisor reportedly commented, “Given interest we received, we feel we will have a healthy overbid process.”
Meaning that Ziff Davis might not end up the parent of Gawker.
A Gawker Media spokesperson reacts: “We created the most successful independently funded media business operating at scale, and now new ownership will ensure the continued success of our popular brands. Peter Thiel can force us to sell, but he will not force us to go away. This case has shed light on the risks to independent journalism of secretive revenge campaigns funded by Silicon Valley billions. And we are confident that the appeals court will rule in our favor, ultimately proving that free press is more powerful than a billionaire’s grudge.”
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