As DomainNameWire.com reported tonight the auction of Sex.com has been postponed due to the filing of bankruptcy by the debtor Escom, LLC.
At the root of the issue is going to be the amount owned by the debtor vs. the current value of the asset.
It’s already public knowledge that payments to Domain Capital are at least a year behind, which at their standard 15% interest rate can really add up quickly especially adding in attorney’s fees and costs.
I hate to say I told you so, but I did a few weeks ago when the story first broke, I guessed that the amount needed to clear the amount owed to the creditor might be north of $10M and most likely there would be no sale at this auction.
Once the legal work is done, at some point maybe in the bankruptcy proceeding, this domain is going to sell but it now well be under the amount owned to the creditor.
I also wonder if Domain Capital asked for anyone to sign personally on the note?
I haven’t heard anyone raise this question, but Domain Capital will normally require someone to sign personally on the note in addition to taking the domain as collateral. I have no idea if this happened in this case but its an interesting question.
hahaha this is way too funny.
on top of it DC is gonna keep $1m deposits as well
however, I doubt it will be sold at high price since it can’t give a so big advantage to a porn site, surely nothing comparable with a $14+ million buy!
So what happens to the $1 Million posted by each of the bidders?
http://sex.comchronicles.com for the whole story about the “first lawsuit.”
FX
Interesting, so you think because the whole case is now in bankruptcy the deposited are locked up as well?
Charles
I’m just guessing here but I would say that those deposits are going to be held until the bankruptcy court issues an order releasing them.
I think if you sent in a deposit you are going to have to hire a lawyer to get involved petition the bankruptcy court to get your money back.
Hope I’m wrong.
Also maybe most of the bidder’s planned on showing up in person with their check so maybe not too many people sent it in ahead of time.
I don’t understand how Mike could have $10M in secured loans to the company. DOM Partners wouldn’t have loaned money if it weren’t the primary creditor on the domain.
Andrew
I assume if this statement is correct that most of the downstroke on this purchase came from Mike.
Lets say he put $4M down and Domain Capital loaned the $10M in 2006.
Lets say no payments have been made for a year, like you reported, so you have over 3 years that someone had to pay $1.5M interest on this loan per year, assuming they were paying Domain Capital stated rate of 15% interest, plus maybe some capital payments as well.
That’s another $4.5M just in interest, maybe more.
Then I know they hired some people and tried to do something with the site, that’s more money someone had to put up.
Not sure how much the site was taking in, possibly very little.
I’m sure Mike’s note to the company also carried big interest, so that with the above could get you to $10M.
As I recall, whether or not DC required personal liability on its loans depend(ed) on the loan-to-value (LTV) ratio.
So with enough down (40% or so if I recall), there would have been no such personal liability.
Of course, given how “special” this dot com is and the parties involved, they certainly could have had the domain been the sole security with a smaller down payment.
They are/were negotiable on their terms & conditions.
Quote –
“I’m just guessing here but I would say that those deposits are going to be held until the bankruptcy court issues an order releasing them.
I think if you sent in a deposit you are going to have to hire a lawyer to get involved petition the bankruptcy court to get your money back.”
Just to clarify, the deposits were not given to Sex Company or the secured debtor (DC). They are held in trust by the initial law firm.
Therefore, the court has to determine if they want to honor the deposits for a future auction if it goes that route or exempt the checks.
A good bankruptcy lawyer (representing the bidders) could request the court/trustees to release the checks (relief from stay). But, that percedure could take 60 to 180 days or much more.
I suspect the court will let the trustees make that decision and motion.
Logically the checks are not assets of the debtor.
from the posted site…
“Suppose you found something that turned out to be worth $15,000 a day? And what if before you ever saw a penny, someone stole it from you and pocketed all the money for himself? What would you do to get it back?”
doesn’t sounds as a lucky domain… do you want to pay $20 million for it? 🙂
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it seems that PETA wants the sex.com domain for free
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more details out:
Loan amount revealed as $4.3 million.
http://domainnamewire.com/2010/03/29/sex-com-dirt-inside-details-of-what-went-wrong-with-sex-com/