JAKARTA/SINGAPORE -- Malaysia-headquartered video streaming platform iflix is in talks for a sale to avoid a looming debt crisis and has appointed distressed asset specialists to its board of directors after the departure of its two co-founders, DealStreetAsia has learnt.
Sources from within iflix and in the industry told DealStreetAsia that the on-demand video platform is targeting to close a deal by the end of the month.
The shortlist of potential acquirers is believed to include companies based in Greater China.
Patrick Grove, who was chairman of iflix until as recently as 2019, resigned from the board on April 9 this year, according to regulatory filings obtained by DealStreetAsia.
Luke Elliott, another co-founder of iflix, also stepped down from the company's board the same day.
Grove and Elliott are also co-founders of Catcha Group, iflix's major shareholder. Two other iflix directors also resigned on April 9 - David Nairn and Mark Andrew Licciardo.
On May 7, just under a month after Grove and Elliott's departure, iflix appointed Ryan Shaw and John Zeckendorf to its board.
Shaw and Zeckendorf are principals of Australia-based Mandala Asset Solutions, which describes itself as "experts in distressed asset situations."
Those board changes occurred as iflix comes ever closer to a July 31 deadline for completing an initial public offering (IPO), failing which holders of just over $47.5 million of convertibles could force the company to repay them. Given that the typical IPO process can take weeks after the public lodgement of a preliminary prospectus, iflix's listing window is extremely narrow, if not already closed.
The company could tip into insolvency if the deadline arrives and the convertible holders exercise their redemption option. As at September 2019, iflix had just $12.7 million of cash reserves.
The company reported a net loss of $158.1 million in 2018 as its operations burnt through $25.5 million of cash, resulting in a net liability position of $68.6 million as at end-2018.
That included $77.7 million of negative working capital. In September 2019, the company estimated that it would only have enough capital for ongoing corporate and administrative overheads until November 30, 2019.
iflix has not announced any additional funding since then. The prospects at iflix are dire enough that investor Surya Citra Media (SCM) decided as of December 31, 2019, to fully impair its investment in iflix, taking a 98.62 billion rupiah ($7 million) hit in doing so.
SCM, a listed unit of media group Elang Mahkota Teknologi (Emtek), did not explain the reason for impairment, but it is understood to still hold shares in iflix.
With a listing at this time highly unlikely, iflix's options are severely limited. Even a sale, if a deal can be completed in time, will be complicated by the convertibles.
Convertible debt typically comes with protection against a change of control, and the convertible holders are unlikely to give up their rights without being compensated.
Any buyer of iflix will, therefore, have to reckon with the company's creditors. iflix and Mandala could not be reached for comment.
iflix last disclosed raising capital from Fidelity International, MNC Group, Yoshimoto Kogyo and JTBC in 2019. Earlier investors include Hearst Communications, EDBI, Liberty Global, Zain, Sky Plc and Evolution Media Capital.
The company had been planning for an IPO this year, but in January multiple industry sources told DealStreetAsia that listing plans had been deferred and that the company was looking to raise about $50 million from existing investors instead.
The company in April laid off an undisclosed number of staff across different functions and markets. At the time, iflix chief executive Marc Barnett told DealStreetAsia that the layoffs were in response to uncertainties surrounding the COVID-19 pandemic.
"The industry is not immune to these unprecedented circumstances," he said at the time. "Our decision to reduce the company's headcount has come after careful consideration and in conjunction with other cost-cutting measures, to enable the company to endure this indefinite and uncertain period.
"We remain focused on driving the business through to breakeven in 2021 and these steps are part of ensuring we remain on that path and can navigate the current challenges."
Aastha Maheshwari contributed to this story.
For the original story from DealStreetAsia, click here.
DealStreetAsia is a financial news site based in Singapore that focuses on corporate investment activity in Southeast Asia and India. Nikkei owns a majority stake in the company.