TOWER FILES CHAPTER 11...AGAIN
Tower Records filed a Chapter 11 petition in federal bankruptcy court yesterday (8/20), with the owners seeking to sell the fabled chain "as a going concern" so that a buyer could take control prior to the 2006 holiday season.
According to the Delaware filing, eight separate parties own and operate the 89-store chain, which includes a direct sales network and warehouse distribution facility. According to sources, they are Three A's Holdings, Jeremy's Holdings, Tower Direct, 33rd Street Records, Pipernick, MTS, Columbus Bay and R.T. Records.
Creditors number in the “thousands,” according to the doument. Among the largest: Six Degrees Records ($1.9 million) in San Francisco; International Periodical ($1.3 million) in Chicago; City Hall Records ($595,000) in San Rafael, CA.; and Baker & Taylor Book ($437,000) in Chicago. The chain reportedly owes a total of $87 million, $70 million of that to the four major music distributors, who cut off the chain's line of credit at NARM two weeks ago.
The debtors want the bankruptcy court to establish bid procedures and set an auction date for the sale of assets. A Chapter 11 petition was previously filed two years ago which contained a pre-packaged plan of reorganization. While that case remains open, court documents insist certain claims issues are the only remaining matters left to resolve.
In that restructure, debtors converted $110 million of unsecured notes into common stock comprising 85% of the outstanding equity in MTS and $30 million in new notes.
Since then, Tower's profits have plummeted, blamed on an "industry-wide decline in the sales of physical music and video products" and "intense competition from music downloading (legal and illegal) and 'big-box' retailers which use music and video products as loss-leaders."
