Authentic Brands Group, the company that licenses the Sports Illustrated brand, has warned the publisher that it may terminate its contract “absent a cure” after a fee payment was missed.
In a filing with the Securities and Exchange Commission on Friday, publisher Arena Group said it did not make a quarterly payment of about $3.75 million. Arena has licensed the editorial operations of the venerable brand since 2019.
Authentic “issued the Company a notice of breach with the intent to exercise its right of termination,” Arena said in the filing, adding that they are “in discussion” with the licensor.
Authentic Brands Group said in a statement, “As the second largest brand owner and licensor in the world, a key to Authentic’s success has been and will continue to be the support of our nearly 2,000 best-in-class partners around the world. When they win; we win. In exchange for this trust and support, we simply expect our partners to honor their contractual commitments – financial or otherwise. These arrangements help ensure that the brands they are licensing from us continue to grow and prosper.”
“While we ordinarily don’t comment on the specific details of our relationships with our licensees, these aforementioned expectations unequivocally apply to The Arena Group, the current license holder of the Sports Illustrated brand whereby under such license they operate a traditional ad-supported sports media business. Following a failure to make their quarterly license fee payment on January 1, we have put The Arena Group in breach with an intention to terminate the license absent a cure.”
Authentic wants to ensure that the day-to-day operations of Sports Illustrated continue and believes that it would be able to find another publisher quickly, if it comes to that, according to a source.
Arena also said that it failed to make an interest payment of almost $2.8 million to Renew Group Private Limited, with an outstanding principal of $110.7 million. The company said that it is in discussions with Renew Group to restructure or amend the notes, and has been given a forbearance period through March 29.
In its SEC filing, Arena outlined additional steps it was taking to try to turnaround the business.
According to the SEC filing, Arena Group interim CEO Manoj Bhargava resigned, just weeks after the board ousted Ross Levinsohn as its CEO. Other top executives also exited the company.
Arena said that Bhargava “stepped down from this role to avoid any conflicts of interest which may arise as part of the pending transactions” with his affiliates. The Arena Group signed an agreement in November to combine with Bridge Media Networks.
Arena has engaged FTI Consulting Inc. “to assist the Company with its turnaround plans and forge an expedited path to sustainable positive cash flow and earnings to create shareholder value,” according to the SEC filing. Jason Frankl, a senior managing director of FTI, was appointed as chief business transformation officer.
Authentic Brands Group acquired Sports Illustrated in 2018. It licensed the editorial operations of the brand to Arena Group in 2019 under a 10-year agreement.
