VALLEY MEDIA ABOUT TO BECOME A 7-ELEVEN (OR VICE VERSA)

Insiders at beleaguered wholesale giant Valley Media tell us that, in the wake of the aborted merger with Alliance Entertainment, senior lender Congress Financial has provided only enough DIP (debtor-in-possession) financing to fund day-to-day operations until the Chapter 11 filing is complete (hitsdailydouble, 11/14), after which a Chapter 7 liquidation filing will all but inevitably take place.

A reported 175 employees are being let go today (300 lost their jobs in Valley's Louisville, KY, facility last month), with a skeleton staff staying on through the liquidation process. Liquidators are due on Monday to begin the process of dismantling the once-mighty behemoth and selling it for parts.

Senior staffers were in Los Angeles on Thursday in a last-ditch attempt to convince Congress to give them more time to sell Valley as an entity, but apparently the lender was not willing to throw more money at the foundering company. Expect Valley to file for Chapter 11 bankruptcy protection by early next week, with Chapter 7 likely taking place immediately thereafter. Valley-owned DNA (Distribution North America) will also be included in the Chapter 11 filing, and insiders say the distribution wing has little hope of surviving the process.

This unfortunate chain of events represents the worst-case scenario for both Valley and the majors, who are owed scores of millions by the company. Brutal.