Cerberus to Provide Gawker With $22 Million Bankruptcy Loan

Cerberus Capital Management L.P. has agreed to throw a $22 million lifeline to Gawker Media Group so the digital media company can stay alive in bankruptcy pending a sale of its business.

Gawker, which filed for bankruptcy protection Friday, said Cerberus Business Finance, the private-equity firm's lending arm, has agreed to provide it with $14 million on an interim basis plus another $8 million following final bankruptcy court approval.

Absent the cash, Gawker restructuring chief William Holden said Monday, the company would be unable to pay its employees or vendors and be forced to liquidate.

The bulk of the Cerberus loan, $12.3 million, will pay off Gawker's lender Silicon Valley Bank, according to the filing in U.S. Bankruptcy Court in New York.

Cerberus, named after the mythical three-headed dog that guards the gates of Hades, was founded by former Drexel Burnham Lambert trader Stephen Feinberg in 1992. The $30 billion firm, whose leadership includes former U.S. Vice President Dan Quayle and former U.S. Treasury Secretary John Snow, is a big player in the trading of distressed-debt, where investors buy corporate loans trading at a deep a discount with an eye toward profiting from restructuring a company's balance sheet.

Gawker filed for bankruptcy and put itself up for sale Friday after a Florida judge upheld a $140 million jury judgment against it in a costly legal battle with former professional wrestler Hulk Hogan. Gawker is appealing the ruling.

The filing marked a stunning reversal for the 14-year-old business whose aggressive, irreverent style of reporting engendered media fascination as well as ire among the enemies. Last month, Silicon Valley billionaire and investor Peter Thiel acknowledged financing the legal fight of Terry Bollea, whose pro wrestling name is Hulk Hogan, and other such battles involving people who Mr. Thiel feels have been targeted unfairly by Gawker. Mr. Thiel was outed as gay in 2007 by Gawker's now-defunct Valleywag blog.

The company plans to sell its assets in bankruptcy court and has received an opening bid of $90 million from the digital-media company and magazine publisher Ziff Davis LLC. That offer is subject to higher bids at a bankruptcy auction.

Proceeds from a sale will be funneled to a trust to finance further litigation or cover whatever damages may ultimately be leveled following appeals, which could take years to resolve. Gawker has said that it expects to ultimately prevail.

Whatever money is left at the end of the legal process will go to Gawker Founder and Chief Executive Nick Denton, who owns most of the company, and other shareholders. Earlier this year, Columbus Nova Technology Partners -- the U.S. investment arm of the Renova Group, a conglomerate owned by Russian billionaire Viktor Vekselberg— took an undisclosed minority stake in the media company as it shored up its books for the trial. Gawker owes the company $15 million, according to court filings.

Lukas Alpert contributed to this article.

Write to Patrick Fitzgerald at patrick.fitzgerald@wsj.com

(END) Dow Jones Newswires

June 13, 2016 17:45 ET (21:45 GMT)

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