50 Cent's Boxing Company Avoids a Chapter 11 K.O.
Thursday, June 23, 2016

Curtis Jackson III (a/k/a "50 Cent") has been in the news for many reasons since he burst onto the music scene in 2003 and later became involved in a host of business ventures beyond the recording studio. Most recently, however, the sports side of his finances took a hit when 50 Cent's boxing promotion company, SMS Promotions LLC (SMS), filed for Chapter 11 bankruptcy (In re SMS Promotions LLC, No. 15-20901 (Bankr. D. Conn. filed May 26, 2015))

SMS, which 50 Cent launched in 2012, was supposed to be a joint venture with an established boxer, but that plan was thwarted when the boxer was incarcerated on domestic violence charges. Nonetheless, 50 Cent fought on and started SMS by himself – saying he had experience in the industry from boxing when he was younger.  Initially, SMS appeared to be doing well and signed several promising boxers.  Soon, however, two of SMS's more famous fighters, including featherweight titlist Yuriorkis Gamboa, grew unhappy with their representation and sought to escape from their contracts. This appears to have contributed to SMS's financial duress and its filing for Chapter 11 bankruptcy protection in May 2015.

However, SMS was not out for the count. In January 2016, the bankruptcy court found Gamboa's promotional contracts were still valid and the parties appeared to have later reconciled their differences. 50 Cent also rolled with the punches by settling with another SMS boxer, Ryan Martin – releasing him from his contract in exchange for 20 percent of all gross earnings for any fight the boxer participates in for the next three years as well as a percentage of his signing bonus and sponsorship deals. This reduced SMS's unsecured non-priority claims, excluding insider claims, to roughly $72,000 from around $2.3 million, giving 50 Cent more than a puncher's chance to emerge from corporate insolvency.

Getting a second wind, SMS recently asked the court to dismiss the bankruptcy case, saying it could operate with the amount of unsecured debt outstanding and that such debt did not justify the costs associated with going through bankruptcy. The U.S. Trustee in the Chapter 11 case also moved the court to dismiss SMS's filing for failure to confirm a reorganization plan within certain time limits or otherwise convert the case to a Chapter 7 bankruptcy. In May, a Connecticut bankruptcy judge granted the Trustee's motion and dismissed SMS's Chapter 11 case, allowing SMS to avoid a conversion to a Chapter 7 liquidation, which would have been a knockout blow. (In re SMS Promotions LLC, No.15-20901 (Bankr. D. Conn. May 20, 2016) (Dismissal Order)). Ding, ding, ding: SMS lives to fight another day.

 

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