Bankruptcy Judge OKs Sale of Girls Gone Wild
LOS ANGELES — Is Las Vegas hotel magnate and businessman Steve Wynn buying Girls Gone Wild?
That's what Joe Francis' attorney believes.
The Girls Gone Wild franchise, founded by Francis in 1997, has spent the last few years in receivership after the company found itself liable in a number of multimillion-dollar lawsuits — including one litigated by Wynn.
Just recently, a federal bankruptcy judge gave the green light for a company formed as a limited liability company to purchase the fabled softcore franchise's assets — mostly its trademarks and domain names — to pay off creditors, mainly Tamara Favazza, the woman who won a $5.77 million judgment after she sued over the non-consensual use of her image in a Girls Gone Wild video, and Wynn.
Wynn sued Francis in 2008 amid a legal battle over a $2 million gambling debt Francis at the Wynn Las Vegas resort. In 2012, Wynn was awarded $21 million against Francis after a separate slander trial in Los Angeles.
The purchasing company of Girls Gone Wild, known as Girls Gone Wild Acquisition LLC, stepped up as the sole bidder for the franchise's assets at bankruptcy auction.
Girls Gone Wild Acquisition LLC is backed by an investor group led by Liquidity Capital, which invests in distressed companies. At post time, it was unclear if the sale had closed.
Attorney Michael D. Klodzi, Francis' attorney, told XBIZ he believes that the bidder behind Liquidity Capital was Wynn, who owns the company behind the Golden Nugget, The Mirage, Treasure Island, Bellagio, Wynn and Encore.
"I can't prove it but that is what our belief is," Kolodzi said.
A spokesman for Wynn later told XBIZ that Kolodzi's theory was false.
Kolodzi noted that Francis' company, Path Media Holdings, is challenging the bankruptcy judge's decision on allowing a sale of the Girls Gone Wild assets at the 9th U.S. District Court of Appeals.
He said that the assets as part of the purchase agreement belong to Path Media and aren't part of the estate thrown into Chapter 7.
"We believe the sale of those trademarks are in error," he said.
In February, R. Todd Neilson, the trustee, secured a stalking horse bid from Girls Gone Wild Acquisition LLC for $1.825 million to purchase the brand's assets, including its trademarks, domain names and litigation rights, as well as its assumed liabilities.
The stalking horse bidder put up a good-faith cash deposit of $250,000. With the pre-arranged bid in place, the trustee had planned to drive up the purchase price of the franchise with competing bids to help pay off Girls Gone Wild's claims.
But there were no other qualified bids and the bankruptcy judge later approved Girls Gone Wild Acquisition LLC as the purchaser at a further-negotiated price that hasn't been disclosed.
Last month, Girls Gone Wild Acquisition LLC, in a buyer adequate assurance letter, communicated to the court that the Girls Gone Wild franchise will carry on after the acquisition — and thrive.
Girls Gone Wild Acquisition LLC will remain headquartered in Los Angeles and "will continue to be a leading provider of filmed entertainment," the letter said.
The company will operate under a first-lien credit facility of $5 million to provide with capital for operations and is expected to have no less than $2 million in unrestricted cash upon closing of the sale.
"GGWA is committed to successfully acquiring, transitioning and operating debtor's current concepts and operations," the letter said.
The new company projects to generate in excess of $1.6 million (earnings before interest, taxes, depreciation and amortization) for fiscal year 2014, $3 million for 2015 and in excess of $10 million for 2016.
"As part of GGWA's business plan, substantial capital will be committed to remodeling and improving the company's web presence," the letter to the court said. "GGWA will upgrade technology and support systems and to complete consumer research and brand strategy development to successfully focus and guide management's efforts and decision processes to grow profitability."