November 14, 2002 11:46 AM PST
Comdex organizer may file for Chapter 11
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With its flagship Comdex conference set to begin in just three days, trade show promoter Key3Media warned Thursday that the company may soon need to file for bankruptcy protection.
In a statement accompanying its quarterly earnings, Key3Media said that it does not believe its existing capital structure is sustainable. The company said it will look at alternatives, such as raising additional capital, selling the company or finding a merger partner, as well as potentially filing for Chapter 11 bankruptcy protection.
"Key3Media's board believes 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," the company said in a statement.
A Key3Media representative declined to comment further on the news.
In the statement, the company said its financial advisor, Houlihan Lokey Howard & Zunkin, will explore the various alternatives shortly after the conclusion of the Comdex Fall 2002 trade shownext week.
Key3Media has been trying to cope with the economic downturn for some time. In September, the company said that it was canceling several shows for next year, including Comdex shows in Chicago, Montreal and Vancouver, as well as a combined Comdex/NetWorld+Interop show in Atlanta and a Seybold Seminars event in New York.
For the three months ending Sept. 30, revenue dropped to $38.4 million from $51.5 million a year ago. Excluding interest, taxes, depreciation and amortization, the company lost $299.3 million, compared with a profit of $14.1 million on the same basis a year ago.
The loss includes a $300 million noncash charge to reduce the value of goodwill and other intangible assets.
Key3Media also said there is "substantial risk" that the company will be unable to make a Dec. 16 interest payment on some of its debt. The company said it is in the early stages of discussions with its largest note holders. It is also seeking waivers for some covenants that accompany its bank credit line.
Shares of Key3Media, which had traded above $5 a share last December, now are worth pennies on the thinly traded over-the-counter bulletin board exchange. Shares on Thursday fell 40 percent to 1.4 cents per share, down from 2.4 cents a share on Wednesday.
Comdex began 23 years ago as the brainchild of Venetian casino owner Sheldon Adelson. The show was eventually sold to Japan's Softbank and became part of the events business within the Ziff-Davis media empire.
Ziff-Davis holdings were later split into three main entities: a magazine publishing unit that was sold to a private investment group, online unit ZDNet, which was purchased by News.com publisher CNET Networks and Key3Media, which was spun off to Ziff-Davis shareholders as a public company.
As recently as two years ago, Comdex was attracting some 200,000 visitors, although a number of big computer makers had already left the show floor.