Instead, a debt-for-equity exchange with a group of its lenders, who would assume ownership of the company, is being negotiated. The lenders could not be confirmed by deadline, but GE Commercial Finance Global Media & Communications had arranged a $220 million senior debt facility for Cygnus in 2004.
Industry observers said that many private equity-backed b-to-b media companies have had trouble meeting loan covenants, largely due to plunging print advertising revenue. Cygnus had been acquired in 2000 for $275 million by a private equity fund backed by ABRY Partners.
Cygnus, which cut 30 jobs last month, publishes the market-leading Firehouse and other publications as well as Web sites. It also produces events in the aviation, construction and security markets.
Cygnus’ inability to close a sale is a sign of tough times for the b-to-b media mergers and acquisitions market, which has almost ground to a halt as a result of the credit crisis and uncertainty in the market, a fact that was underscored by a report released last week by the Jordan, Edmiston Group.
The investment bank reported that the value of M&A deals in the media and information sectors totaled $1.3 billion in the first quarter. That was the lowest total the investment bank has recorded in more than 10 years of tracking M&A activity in the media, information, marketing services and technology sectors. The deal value was down 90.5% from the first quarter of 2008, and the number of deals declined 35.8% to 129.
The b-to-b media sector saw deal value plunge 98.8% to $5 million and the number of deals drop 57.1% to three.
In the exhibitions and conferences segment, deal value fell 88.4% to $38 million, and the number of deals declined 42.9% to eight.
“The valuation gap, the difference between seller expectations and buyer pricing, starting off the beginning of the year was pretty significant,” said Scott Peters, managing director of Jordan, Edmiston. Peters said the firm expected the valuation gap to decrease and deal flow to pick up in the third and fourth quarters of this year.