You wouldn’t typically turn to Weil’s Bankruptcy Blog for online dating advice. And if you did, you should probably seek professional help, and not of the kind that Weil can provide. Nonetheless, on this Valentine’s Day, a day for the exchange of tokens of affection (thank Google for that definition), the Weil Bankruptcy Blog would like to impart the following words of wisdom to you, to guide you in both your professional and personal life:
Tip #1: Discretion is the Better Part of Valor
If you were ever a member of True.com, you’ll be glad to know that the Attorney General of the Great State of Texas has got your back. Founded in 2003, True.com was a provider of online dating services in the U.S. which by 2007 had gross revenues of nearly $100 million and 43 million total customers. If you’re thinking, “I’m in the wrong business,” read on. True Beginnings, LLC filed its chapter 11 petition in August 2012 in the United States Bankruptcy Court for the Eastern District of Texas, citing banking reform legislation and the great recession for the loss of more than 80% of its gross revenues. Love just isn’t what it was.
In August 2013, the trustee for True Beginnings filed a sale motion that sought to sell substantially all of the assets of the debtor to PlentyOfFish Media Inc. (which, as online dating aficionados out there well know, operates Plenty of Fish, a free online dating site) for $700,000.
In the event that you’re one of the poor (or lucky, as the case may be) souls on a blind date this evening, and should you find yourself at a loss for topics of conversation, here’s one for starters: will your dining companion know that section 363(b)(1) of the Bankruptcy Code contains provisions specifically designed to protect certain personally identifiable information of consumers in connection with the sale of assets under section 363(b) of the Bankruptcy Code, in particular the appointment of a consumer privacy ombudsman? Probably not. He or she will therefore be fascinated to find out that section 332 of the Bankruptcy Code also governs the consumer privacy ombudsman’s role, which is specifically to assist the court in its consideration of the facts, circumstances, and conditions of a proposed sale or lease of such personally identifiable information under section 363(b)(1)(B). Personally identifiable information is defined in section 101(41A) of the Bankruptcy Code and includes, among other things, names, addresses and telephone numbers. On second thoughts, perhaps it’s best to stick to something more anodyne, March Madness perhaps.
Attorney General Abbott sought to require True Beginnings to notify all of its potentially affected customers of the potential transfer of their highly sensitive personally identifiable information, and to obtain their consent, preferably on an “opt-in” than “opt-out” basis, before the transfer of their data to PlentyOfFish. Given the uncertainty at how many online daters would opt to have their personally identifiable information transferred, and with plenty of (other) fish around, PlentyOfFish ended its brief bankruptcy courtship with True Beginnings.
All’s well that ends well, however, and just because the Attorney General ruined True Beginnings’ date with PlentyOfFish, the story doesn’t end there. True Beginnings’ recently had its chapter 11 plan confirmed, selling its “True.com” domain name for at least $300,000 and reorganizing its online dating business around a new site, all the while holding on to the personally identifiable information of its loving members. So True Beginnings can say it survived its fling with bankruptcy court to live happily ever after.
If there’s a lesson to be learned here, it’s that privacy policies matter, both in and out of bankruptcy for businesses that collect highly sensitive personally identifiable information. Just like in any relationship, courtship, or online dating profile, better to be clear, straightforward and truthful to avoid problems down the road. As any gentleman or lady knows, discretion is the better part of valor.
Tip #2: Look For Love in the Right Places
Lending credence to the old adage that the only person who sticks closer to you in adversity than a friend is a creditor, Boca Raton-based FriendFinder Networks, Inc., the operator of numerous online dating and adult-entertainment websites and publisher of Penthouse magazine, obtained confirmation of its debt-for-equity-swap chapter 11 plan on December 16, 2013. Having filed for chapter 11 protection in Delaware on September 17, 2013, the company emerged from bankruptcy, now known as PMGI Holdings Inc., on December 20, 2013. FriendFinder operates its namesake Adult FriendFinder, a website (we are reliably informed) for mature audiences, FastCupid, PerfectMatch, and less controversial Christian matchmaker BigChurch.
With more than $565 million in bondholder debt, FriendFinder Networks found that its network of friends just weren’t that profitable. While social media sites like Facebook and LinkedIn have boomed in recent years, FriendFinder had not turned a net profit since at least 2008, and as a result of a highly levered capital structure coupled with declining financial performance and pending debt maturities, the company sought chapter 11 protection.
PMGI Holdings’ plan of reorganization allowed it to consummate a deal with noteholders that would reduce debt by $300 million in exchange for ownership of the company. The plan provides for the exchange of $234.3 million in first-lien claims against FriendFinder for an equal amount of principal in new first-lien notes, and a pro rata share of non-default interest, as well as a portion of first-lien default interest if any first-lien excess cash remains.
Second-lien bondholders might not have been looking for a long term relationship with FriendFinder when they first got involved with the company, but with $330.8 million in second-lien claims receiving their pro rata share of 100% of the reorganized company’s new common stock as well as any available second-lien cash, their fates are now intertwined.
So a word of caution from the Weil Bankruptcy Blog here: make sure you look for love in the right places this Valentine’s Day, because you never know what you’re going to find if you look in the wrong places.
Tip #3: The Greatest Gift You Can Ever Give Another Person Is Your Own Happiness
This old adage may well be true, but if you want to give someone a gift that is more tangible, don’t forget that Weil mini-basketballs are on offer as part of the Bankruptcy Blog’s March Madness competition: submit a great quote or excerpt from a bankruptcy-related decision and win your loved one an awesome Weil mini-basketball! Our competition ends today.
Happy Valentine’s Day!
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