Kew Media Group’s (KMG) move into administration last week prompted searching questions from all those connected with the once fast-growing production and distribution outfit.
TBI has spoken to a variety of execs involved and is today running the first of two articles that delve into not just what happened at the international production and distribution outfit but what we can expect next.
Rapid rise and steady decline
Kew was launched into the market by founders Peter Sussman and CEO Steven Silver in 2017, using an investment vehicle to acquire Content Media Corp and six other producers for a combined C$104m (then $85m). It went on to pick up companies such as Sienna Films and TCB Media Rights, as it attempted to reach scale at a rapid pace.
By the end of last week, those ambitions were over. KMG was placed into administration on Friday and its directors – including Sussman and Silver – left the company. But that was just the latest chapter in what has been something of a downward spiral for KMG over the past nine months.
Summer of discontent
Speaking to execs involved, the worries first emerged during the summer. Some producers providing their product to Kew’s sales arm, Kew Media Distribution (KMD), were no longer receiving what they should have been when it was due, prompting concerns that a more serious problem was brewing.
Execs also cited longer-term worries over a “hands-off” approach to management that had failed to create group efficiencies. There were also concerns that corporate overheads had soared and the cost of an LA-based scripted team was cited as a potential cash drain that hadn’t provided much in the way of returns.
By the time MIPCOM rolled around in October, the company – which had been funded by an IPO and was floated on the Toronto Stock Exchange – was again seeking investors, hosting both analysts and potential investors. The invite-only event in Cannes promised “guided tours” of the event and “opportunities for guests to network with leading industry experts, as well as attend various panel sessions and keynote speeches.”
Kew had also been touting for investment earlier in the summer, with a presentation dated June 2019 claiming that the company offered “compelling industry fundamentals driven by growing demand for content,” raising eyebrows among some both inside and outside of the company.
However, MIPCOM came and went, and November brought more negative news. Third quarter results revealed overall revenues were down 5.3% to $47.5m, with producing revenue falling by almost a quarter. Distribution was up but the overall picture was plain. Kew put the decline down to its Australia-based producer Essential Media, which it said had been hit by Discovery’s rebrand of DIY channel Magnolia. As a result shows such as Texas Flip n’ Move were hit and the company’s CEO Chris Hilton departed.
A month later, things went from bad to worse. The Canada-based company revealed a strategic review and chief financial officer Geoff Webb left the business after Kew said reports containing “inaccurate information regarding working capital” had been filed. The ”growth at any cost” approach, as one exec put it this week, was failing as the impact of cash burn stung.
As investors took fright, Kew’s shares plummeted. A special committee of independent directors – including financial advisor TD Securities – examined “strategic alternatives” for the company, including splitting the business up and private equity took a look.
A deal failed to materialise and Kew then defaulted on its Truist Bank-backed credit facility as Christmas approached, as revealed by TBI. Creditors plotted a course of action and an attempt to restructure Kew began in earnest under the leadership of interim CFO Michael Corrigan, with assets being sold off.
As Kew entered a new decade, firms such as Dance Moms producer Collins Avenue Entertainment and Glasgow-based producer Two Rivers Media secured deals to buy their way out of the stricken group. But there was no let-up for Kew and as February progressed, it became clear that the company had few options left.
Just hours after Frantic Film’s CEO Jamie Brown personally financed a deal to repurchase a 100% stake in his company, Kew’s main creditor, Truist Bank, confirmed it had “accelerated the maturity date” for repaying debts owed.
Kew enters administration
The US bank pulled the plug shortly afterwards, with the speed of the decision surprising some insiders. Kew formally entered administration on Friday evening and staff were laid off – from London to LA. FTI Consulting Canada Inc was appointed as receiver and is now looking to sell remaining assets, with proceeds then being distributed back to Kew’s creditors.
It is important to note that none of Kew’s production companies are subject to the receivership or UK administration, however.
That means companies such as TCB, the profitable UK-based company that is enjoying one of its best years to date, has found itself at the centre of a battle to be acquired.
Essential, meanwhile, is also understood to be negotiating an exit deal as are companies including Awesome Media & Entertainment, the latter helped because Kew only held a minority stake. For staff at KMD, however, the once profitable sales division of Kew, any hopes of survival have been dashed.
TBI next will explore the implications of Kew’s demise and what might happen next.