Tech-Mag Publisher Ziff Davis Files for Bankruptcy

Ziff Davis Media Inc., publisher of technology and video game magazines, filed for bankruptcy on Wednesday and cited a decrease in revenue from print advertising and subscriptions as contributing to its decline.

But the company said it expected to reorganize quickly and exit court protection by midsummer.

New York-based Ziff Davis said in a court filing that it had about $500 million in liabilities and $313 million worth of assets, as of the end of December. It filed for Chapter 11 protection to restructure debt that had become burdensome.

"We feel like we're in a position poised for wonderful growth," Ziff Davis Chief Executive Jason Young said Wednesday. "We just needed to solve this issue."

The company is the publisher of PC Magazine and Electronic Gaming Monthly and Web versions of those magazines.

Ziff Davis reached an agreement with senior creditors, to whom it owes $225 million. Under the deal, the senior creditors will be owed $57.5 million and at least 88.8 percent of the common stock in the company once it emerges.

The company was unable to reach an agreement with more junior creditors, and is looking to use the court process to resolve that. Another 11.2 percent of the reorganized company's stock is available for distribution to those debt holders under the company's current proposal, but those creditors are likely to seek more equity in court.

Creditors have set aside $24.5 million to fund the company's operations during the case and after it concludes. The company's filing states there are between 1,000 to 5,000 creditors.

The company reaches 26 million consumers through 16 Web sites, three magazines and direct marketing. It is a remnant of a publishing empire established in the 1920s by William B. Ziff Sr. and Bernard G. Davis, who introduced such titles as Popular Aviation and Popular Electronics. In 1994, the Ziff family sold a 95 percent stake to private equity firm Forstmann Little & Co. for $1.4 billion. The following year, Softbank Corp. bought 70 percent of the company from Forstmann for $2.1 billion. Softbank in turn sold the company to another private equity firm, Willis Stein & Partners, in 2000.

The bursting of the Internet bubble hurt publishers like Ziff Davis, which said its print advertising revenue dropped to $40 million last year from $215 million in 2001. Its total revenue fell to $76 million last year from about $300 million in 2001.

Young said the company was focused on growing the online side of its business and that it has made progress over the past seven years to generate a growing share of its revenue from digital businesses over traditional print publications.

"Operating-wise, we have executed this tremendous transformation," Young said.

As of the end of December, it had 266 employees, with headquarters in New York and an office in San Francisco. Young said he did not anticipate the loss of any jobs.

Ziff Davis Media's parent company is Ziff Davis Holdings, which trades as an over-the counter stock.

The case has been assigned to Judge Burton Lifland in the federal bankruptcy court in the Southern District of New York.