Troika Media secures confirmation of Chapter 11 liquidation plan

By Sarah Lizee

Olympia, Wash., March 28 – Troika Media Group, Inc.’s Chapter 11 plan of liquidation was confirmed on Thursday by the U.S. Bankruptcy Court for the Southern District of New York, according to an order.

As previously reported, the plan is based on a settlement the company recently reached with the official committee of unsecured creditors, Blue Torch in its capacity as agent to the company’s prepetition and post-petition lenders, and participating Converge sellers.

As a reminder, the debtors have been part of disputes arising from Troika’s March 2022 acquisition of debtor Converge Direct, LLC and its affiliates from the four selling shareholders of Converge Direct, LLC.

Since June 2022, the company, lender Blue Torch Finance LLC and the Converge sellers had a disagreement concerning the release from escrow of about $30 million funded from a $75 million secured loan from the prepetition lenders made in connection with the acquisition.

Troika said the core of the escrow dispute is whether the audited financials that the debtors delivered to Blue Torch in June 2022 were sufficient to satisfy the condition for the release of the escrowed funds to the Converge sellers under the escrow agreement.

The company, Blue Torch and the Converge sellers have also had disagreements regarding the payment of about $4.4 million in post-closing excess accounts receivable to the Converge sellers, as well as a side letter under which Converge Direct and Troika agreed that $5 million in unrestricted cash would remain on Converge Direct’s balance sheet following its acquisition by Troika.

The Converge sellers asserted that they were owed at least $38.5 million arising from the Converge purchase agreement and related documents.

Among other terms, the settlement provides that about $28.83 million in escrow funds will be released. About $20.93 million will be disbursed to three of the Converge seller individuals. Through a separate settlement with the fourth Converge seller individual, the debtors’ estates will get $7.91 million from the escrow funds, $3 million of which will be retained to fund the Chapter 11 cases and a $500,000 cash pot for general unsecured claims.

Troika said the benefits of the settlement outweigh the company’s likelihood of success in litigation over the disputes.

Under the plan, administrative claims, priority tax claims, secured claims and priority non-tax claims will be paid in full.

Holders of Blue Torch deficiency claims will receive a pro rata share of interest in the litigation trust.

Holders of general unsecured claims will receive a pro rata share of a cash pot.

Holders of interests will receive nothing under the plan.

Troika is a brand consultancy and marketing company based in New York. The company filed bankruptcy on Dec. 7 under Chapter 11 case number 23-11969.

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