Getty Images says investor litigation helped push it to bankruptcy
Getty Images says investor litigation helped push it to bankruptcy By Dietrich Knauth
NEW YORK, Oct 22 (Reuters) - Costly investor disputes helped accelerate Getty Images' fall into bankruptcy, its attorney said Thursday, with about $200 million in legal judgments weighing on the photo and image company's recent performance.
Bankruptcy attorney Brian Schartz said at a court hearing in Wilmington, Delaware, that the company could also face up to $275 million in future liabilities related to the investor disputes. Getty Images has spent another $35 million on legal fees to dispute the investor claims over the past four years, he added.
Getty Images filed for bankruptcy on Wednesday with $1.46 billion in debt, citing the investor litigation, a failed merger with Shutterstock, and its high debt as reasons for the move. Despite having total revenue of $978 million over the past 12 months, Getty Images was down to just $20 million in cash at the time of its Chapter 11 filing, and had been hit with a large legal judgment over the summer it could not pay.
"Thus far, defending those claims outside of bankruptcy court has not swung in the company's favor, and the company does not have the liquidity or time to engage in that type of challenge at this point," Schartz told US Bankruptcy Judge Kate Stickles, who is overseeing the company’s Chapter 11 case.
Getty Images has been sued by several investors, who alleged that the company violated agreements that should have allowed them to acquire shares at $11.50 per share. Getty blocked investors from exercising warrants at a time when the share price briefly rose to $32, and it has lost two lawsuits over the warrants so far. Getty had argued that the warrants could not be exercised at that time because they were still awaiting approval from US securities regulators.
Getty paid $110 million to two large investors in April, after losing a federal court case and an appeal. Getty recently lost another lawsuit that resulted in a $92 million judgment that it has not yet paid. The company sought to appeal that judgment, but it could not afford to post a bond that would have enabled it to put that judgment on hold while it appealed.
Shareholders, who are set to have their equity stakes wiped out in bankruptcy, plan to seek a court-appointed equity committee to represent their interests in bankruptcy, Schartz said.
In addition to the investor disputes, Getty also cited its failed merger with Shutterstock, which the two companies abandoned earlier this year due to the UK competition regulator's requirement to sell Shutterstock's editorial business as a condition for approval.
Getty Images entered bankruptcy with a restructuring agreement that would cancel existing equity and convert it into a private company that is 100% owned by affiliates of the Getty family and Koch Equity Development. The Getty family affiliates and Koch Equity Development have agreed to make a $533 million investment in the company, and the deal is supported by creditors who hold 90% of Getty Images’ debt, according to the company.
The case is Getty Images Holdings Inc, US Bankruptcy Court for the District of Delaware, No. 26-11643
For Getty Images: Brian Schartz of Simpson Thacher & Bartlett LLP
For an ad hoc group of equity holders: Robert Stark of Brown Rudnick LLP
Read more:
Getty Images scraps $3.7 billion merger with Shutterstock over UK scrutiny
Getty Images files for US bankruptcy, advances restructuring plan
(Reporting by Dietrich Knauth)