Second-round proposals for Modern Luxury, known for its upscale regional magazines, were due last week. The magazine publisher still has a brand name and will likely fetch about half its goal, or just over $10 million, one banker said. Interested parties also are expected to assume some liabilities.
It’s worth noting that a source close to the company calls the $10 million price too low, but it’s in that source’s interest to say that.
Private equity is mainly involved in the auction, with bidders including Platinum Equity and Castanea Partners. Berkery Noyes is managing the process.
Modern Luxury was riding high in 2007 when its then-owner, Shamrock Capital, sold its 60% stake to Clarity Partners. At the time, Modern Luxury, had $16 million of EBITDA, but it has since declined significantly. Currently, it has nearly 30 publications in 13 major markets including Angeleno, Manhattan and Interiors.
Michael Kong, the former CEO and founder, is trying to get a proposal in place, although he is not viewed as the lead bidder. Kong had owned 40% of Modern Luxury but reportedly defaulted on $120 million in debt and was ousted, according to the New York Post. He was replaced by William Cobert, founder of EBITDA Media, who is acting as interim CEO of Modern Luxury.
Modern Luxury is currently being controlled by its lenders, GE Business Financial Services and NewStar Financial. The banks are reticent to let Kong become involved with the company again, the banker said. “There’s lots of bad blood,” the source said. “He was the CEO and he put all this debt on [Modern Luxury] and it fell apart.”
However, a buyout source said that Kong was responsible for capping debt placed on Modern Luxury when it was sold. The seller, in 2007, was offering staple financing of $105 million and several firms wanted to place more debt on the company. Kong wasn’t comfortable with the higher and didn’t allow it, the source said.
“It was Clarity that put all the debt on [Modern Luxury],” the person said.
Officials for Newstar and Modern Luxury could not be reached for comment.