Questex Files for Bankruptcy

Questex Media – which owns 28 events, including two tradeshows on the Tradeshow Week 200 – has filed for bankruptcy protection. By way of what is known as a Section 363 sale process, Questex's lenders will take over all of its assets.

Meanwhile, its management, led by CEO Kerry Gumas, will remain in place and all its business units will continue to operate, company officials said.

According to documents filed with U.S. Bankruptcy Court in Wilmington, Del., a group of first-lien lenders, led by Credit Suisse, essentially have taken over control of Questex's assets, acting as what is referred to in bankruptcy parlance as a “stalking horse” bidder when the company's assets are auctioned off.

“We are pleased with the strong support we have received from our lenders and business partners for a restructuring that will allow us to reduce our debt and achieve a strong, sustainable capital structure,” Gumas said in a statement.

Through a spokesman, Gumas declined to speak to TSW.

Questex was formed in 2005 when Gumas and his investors paid Advanstar Communications $185 million for a portfolio that at the time included 50 Web sites, 25 conferences, 23 magazines and 20 tradeshows.

The company has made several acquisitions since then – as recently as early this year it bought FierceMarkets, an online business-to-business media company with 19 online publications.

However, as its portfolio has grown, so has its debt. According to bankruptcy court documents, Questex has $321 million in liabilities and $299 million in assets. It is carrying $186 million in first-lien debt and $56 million in second-lien debt. It also owes $18.5 million to the principals of previously acquired companies.

Questex's Chapter 11 restructuring is just the latest in the B-to-B world. Cygnus Business Media recently emerged from Chapter 11 protection, and Advanstar completed a $385 million restructuring.

“In many industries, not just media, mergers and acquisitions done between 2005 and 2007 are in trouble,” said Michael Hughes, TSW vice president for research and consulting. “Buyers simply took on too much debt based on business models forecasting 5- to 10-percent annual revenue growth. No one forecast, or even imagined, 20- to 30-percent revenue declines.”

Questex company officials said they were projecting a 50-percent drop in earnings this year.

The bankruptcy proceedings do not include any of Questex's international operations.

Its Intl. Esthetics, Cosmetics & Spa Conference Las Vegas is No. 128 on the 2009 TSW 200; its Intl. Beauty Show New York, No. 161.

Company officials said the entire bankruptcy proceeding should take about 60 days. In the interim, Questex's lenders have given it a $15 million loan to use for day-to-day operations which, officials said, will “preserve its going-concern value.”

A spokesman for the company said it is unlikely assets will be sold off piecemeal, at least for the time being, and current management is expected to remain in place.

“These bankruptcies may mark that we're getting near a bottom in the B-to-B media recession,” Hughes said. “They are painful, but at least they mark a change in direction.”

Referring to all three recent restructurings of B-to-B media companies, he said most of the problems have been with their print products rather than their events, but not exclusively.

“The event divisions have been stronger than the magazines at these firms,” Hughes said, “but events haven't been immune to the downturn.”