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SAN FRANCISCO-Ownership of social media site Bebo.com returned to its founders as a winning bid in a U.S. Bankruptcy Court for the Central District of California sale approved July 3 (In re Bebo.com Inc., C.D. Cal., No 2:13-bk-22205, order filed 7/3/13).
MXB Holdings LP, which includes Bebo founders Michael and Xochi Birch, won Bebo.com's assets, including the internet site, intellectual property, and accounts for $1,010,000, according to a U.S. District Court for the Central District of California order. The backup bid was for $990,000 from online dating site Match.com, and a second backup bid was $150,000 from social media site Tagged Inc.
Bebo, which AOL bought for $850 million in March 2008, and sold to Criterion Capital in June 2010, for an undisclosed sum, filed for Chapter 11 in May citing liabilities in the $1 million to $10 million range (25 BBLR 710, 5/23/13).
In 2008, Bebo was the third-largest social networking site in the United States, according to a lawsuit site founders filed against Criterion, a Los Angeles-based merchant banking and financial advisory firm.
“We just bought Bebo back for $1m,” Michael Birch said in a July 1 tweet. “Can we actually re-invent it? Who knows, but it will be fun trying…,” he said.
Counsel for MBX could not be reached for comment July 5.
In a petition for the sale free and clear of liens MXB said that it funded additional loans to the receiver as the debtor was in need of cash. Exclusive of the other claimants' secured debt, MXB holds all of the debt secured by assets of Bebo.
Bebo has been operating at a loss since the California Superior Court, San Francisco, appointed receiver, MXB said in the motion. “The Debtor has only been able to sustain its operations through the secured loans provided by MXB and the other minority shareholders,” the motion said.
If Bebo was shuttered, users--its most valuable asset--would flee and find replacements, cutting the ability to restart resulting in a “very large, and irreversible negative impact on the Debtor's sale value,” MXB said.
The claimants stipulated that if the cash proceeds in combination with any credit bid presented by MXB are sufficient to pay the other claimants' debt, the assets shall be sold free and clear of all liens.
The bankruptcy filing listed the Internal Revenue Service as the top unsecured creditor, owed $380,000, followed by Criterion Capital and Adam Levin, whose claim for $317,000 in management fees is disputed. Bebo.com also owes $413,617 in trade debt, including $120,900 to AOL.
MXB and other investors sued Criterion and Levin in March 2012, alleging breach of fiduciary duties, abuse of control, and gross mismanagement (MXB Holdings LP v. Levin, Cal. Super.Ct., No CGC-12-518820, inventory and expense filed 6/6/13). Trial is scheduled for Oct. 7.
Text of order approving sale is available at: http://www2.bloomberglaw.com/public/desktop/document/Bebocom_Inc_Docket_No_213bk22205_Bankr_CD_Cal_May_09_2013_Court_D/3. Stipulation of sale free and clear of liens is available at: http://www.bloomberglaw.com/public/document/Bebocom_Inc_Docket_No_213bk22205_Bankr_CD_Cal_May_09_2013_Court_D/2.
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