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RLJ Entertainment Gets $15 Million Lifeline

16 Apr, 2015 By: Erik Gruenwedel

BET founder and RLJ namesake Robert L. Johnson has purchased 15,000 shares of RLJ Entertainment for $15 million — funds the Silver Springs, Md.-based home entertainment distributor said it would use to reduce debt and for working capital purposes.

As part of the capital infusion, bond holders agreed to convert 50% of the RLJE’s outstanding long-term debt into convertible preferred stock. They also amended downward the subordinated notes’ interest rate, among other changes. 

"My completion of the private purchase underscores my confidence in the management team and my commitment to the future of the business,” Johnson said in a statement.

Founded in 2012 with the merger-acquisition of Acorn Media and Image Entertainment, RLJ Entertainment has attempted to meld a softening packaged-media business with a rapidly evolving over-the-top-video market.

In addition to established British-centric streaming service Acorn TV (with 130,000 subs), RLJE last year bowed SVOD service Urban Movie Channel (UMC), featuring drama, documentaries, comedies, horror and stage plays.

Industry changes required RLJE to delay release of its 2014 financial results to deal with fiscal restructuring. The company April 16 reported that revenue for the fourth quarter dropped 33.5% to $19.8 million due in part to the termination of a feature-film output deal with Image Entertainment.

The company's direct-to-consumer segment, which includes Acorn TV and UMC, saw revenue decline $3.9 million year-over-year. The decrease was due to lower catalog sales of $7.5 million as a result of reduced circulation and increased backorders, which were due to customer orders not shipping during the year due to limited availability of cash to replenish inventory levels.

Revenue for the year dropped 23% to $77 million from more than $101 million in 2013. The net loss narrowed to $20 million from $31 million in 2013.

On the positive side, Acorn TV generated revenue of $4.1 million in 2014 compared to $488,000 in 2013. The increased revenue was due to an increase in paying subscribers to 118,000 from 57,000 in 2013. RLJE also cut $4.9 million in SG&A expense.

“Over the past year, we have made great advancements toward improving our operations. The company has brought in new equity, restructured its capital structure and dramatically delevered its balance sheet and lowered its interest expense,” CEO Miguel Penella said in a statement.

About the Author: Erik Gruenwedel

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