Source Interlink SVP discusses bankruptcy filing

Source Interlink's bankruptcy filing will help the company, and its action sports titles, focus on online upgrades and be positioned to grow when the global economy recovers, Al Crolius, the company's senior vice president and leader of the action sports group said in an interview with Shop-eat-surf this morning.

"It's a new beginning for us around here," said Crolius, who oversees 18 magazines and web sites from Source's San Juan Capistrano, Calif., office.

He compared the prepackaged bankruptcy filing to a refinancing. "It's like we went from three mortgages to one," he said.

In essence, the deal allows chief lender Citigroup to take full control of the company in exchange for forgiving about $1 billion of the nearly $1.5 billion in debt Source Interlink took on when it purchased Prime Media in 2007, Crolius said.

"This isn't like a company in a traditional bankruptcy, where we're out of money," Crolius said. "This company is making a lot of money, and that's what made it a favorable business for the banks to invest in.

"Citi and some smaller banks become the major shareholders, and the (common) stock goes away. But if you were following the stock over last six months, it was trading at a range of 18 - 25 cents a share ... because our debt was so high.

"My take on it all, I'll be very open, I've been hoping this would happen for a very long time, to get us out from under the debt the company assumed when Prime Media sold to Source. It's been a very difficult couple of years, with everything going to service a couple billion dollars of debt."

Here are some highlights of our conversation:

• The action sports group avoided layoffs, furloughs and paycuts during the current downturn, though it has seen advertising revenue and pages decline. Instead, the company left vacant positions unfilled - and will now look to fill some strategic spots, Crolius said.

• The company has no plans to consolidate any of the 18 titles in the groups that Crolius oversees, he said. In addition to the surf, skate and snow magazines, he also supervises the equine and home tech groups.

• Surfer magazine generates nearly a 25 percent bottom line return, and has continued to do so during the downturn, though it has seen advertising declines. All together, Source Interlink's magazines generate nearly $100 million in revenue a year, Crolius said.

• Future online growth could include ventures like the new btrails.com site, where mountain bike riders submit entries to help the site build a database of every mountain biking trail in the U.S. Brands are anxious to partner with the effort and be included beyond banners on the site, Crolius said.

"The advertising community and bike companies want that extra tie-in, and we're trying to do that across all our sites," he said.

• Source Interlink will also try to grow advertising revenue by adding more non-endemic sponsors to its mix, across all of its magazines and web sites.

• None of the group's 80 employees had stock in the company through its retirement plan, and the company's 401(k) plan remains intact, Crolius said.