Rdio files Chapter 11 bankruptcy, sets procedures for $75 million sale

By Caroline Salls

Pittsburgh, Nov. 18 – Rdio, Inc. filed Chapter 11 bankruptcy on Tuesday in the U.S. Bankruptcy Court for the Northern District of California.

As previously reported, Rdio reached an agreement to sell several of its key assets to Pandora for $75 million.

In addition to acquiring technology and intellectual property from Rdio, Pandora said in a news release that many members of Rdio’s team will be offered roles with Pandora, subject to close of the agreement. Pandora said it expects to offer an expanded listening experience by late 2016, pending its ability to obtain proper licenses.

Upon approval of the proposed transaction by the bankruptcy court, Rdio will be winding down the Rdio-branded service in all markets. Pandora said it is not acquiring the operating business of Rdio, and Pandora is acquiring the technology and talent to accelerate its own business strategy.

If Pandora is not the high bidder for the assets, Rdio will pay it a $2.25 million break-up fee and reimburse up to $500,000 of its sale-related expenses. Up to $2.5 million in service fees will also be repaid to Pandora if it is not the high bidder.

Competing bids must be for at least $1 million more than the stalking horse bid, plus the amount of the break-up fee, expense reimbursement and service fees.

Subsequent bids must be made in minimum increments of $500,000.

Rdio said the sale is targeted to close by Dec. 31.

DIP financing

In connection with the bankruptcy filing, the company has obtained a commitment for $3 million in debtor-in-possession financing from pre-bankruptcy secured party Iconical Investments II LP.

Interest will be 8%.

The facility will mature on the earliest of Jan. 15, the effective date of a plan of reorganization or liquidation, completion of a sale of all or substantially all of the company’s assets, the occurrence of an event of default and the entry of an order approving an alternative DIP facility.

The company is seeking interim access to $1.8 million of the DIP financing.

Debt details

According to court documents, Rdio has $50 million to $100 million in assets and $100 million to $500 million in debt. Specifically, the company said it has $190.24 million of secured debt and roughly $30 million of unsecured debt.

The company’s largest unsecured creditors are:

• Roku, Inc. of Dallas, with a $2.76 million claim;

• Sony Music Entertainment, based in New York, with a $2.4 million claim;

• AXS Digital, LLC of Los Angeles, with a $1.25 million claim; and

• Shazam Media Services of New York, with a $1.17 million claim.

The company is represented by Levene, Neale, Bender, Yoo & Brill LLP.

Rdio is a San Francisco-based licensed music service. The Chapter 11 case number is 15-31430.

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