(Bloomberg) -- Candle Media, the Blackstone Inc.-backed entertainment company led by two former Walt Disney Co. executives, has asked lenders to restructure some of its debt after recent acquisitions like the CoComelon kids TV business failed to hit profit targets.
The company is seeking to reduce its cash interest payments, according to people familiar with the matter. Candle is waiting for lenders to respond to its proposal, said the people, who asked not to be identified because the discussions are preliminary.
Led by Kevin Mayer and Tom Staggs — two men once in line to lead Disney — Candle has more than $1 billion in debt from $4 billion in acquisitions, including Moonbug Entertainment, the producer of the CoComelon series, and Reese Witherspoon’s Hello Sunshine production company.
Candle declined to comment. A spokesperson for Blackstone said the investment manager routinely holds discussions with lenders on amendments to portions of loans — as would be expected coming out of two once-in-a-generation strikes in Hollywood.
“The company is incredibly well positioned with world-class brands, intellectual property and management,” the Blackstone spokesperson said. “Candle is growing strongly and has significant liquidity. We look forward to supporting the company’s growth in 2024 and beyond.”
Candle was one of many companies eager to capitalize on the boom in programming for streaming services. With Blackstone’s help, Mayer and Staggs went on a buying spree in 2021 and 2022 to build an independent studio that would sell programming to the biggest streaming services and TV networks.
But major media companies began to pull back on spending last year as investors pushed them to deliver profits from their online offerings. Hollywood writers and actors also went on strike this year, freezing production in much of the world for several months.
As a result, 2023 earnings at Candle are expected to fall about 50% shy of forecasts. Hello Sunshine is off by 90% while Moonbug is off by about 30%. A downturn in the advertising market has also hurt the company.
The shortfall in earnings has reduced the cash flow that Candle needs to invest in more programming and acquisitions, the person said. The company is asking that some payments scheduled to be made in cash be instead added to the overall principal of its debt. Candle has more than $100 million in available liquidity, one person said.
Mayer and Staggs told Bloomberg News earlier this year that the setback was temporary, saying the company is profitable and will bounce back. In addition to leading Candle, the two men are also helping Disney find a partner to accelerate the ESPN sports network’s transition to streaming.
“It was a disappointing year for sure,” Mayer said of Candle in an October interview. “But we like our position.”
(Updates with Blackstone comment beginning in fourth paragraph.)
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