ERI to Liquidate Under Assignment21 Aug, 2006 By: Erik Gruenwedel
As expected, Entertainment Resource, Inc. formally filed a petition for an assignment for the benefit of creditors (Chapter 727) — a state alternative to bankruptcy.
The 13-year-old Dania, Fla.-based distributor of DVDs and CDs to drug stores and supermarkets, including Walgreens and Publix, earlier this month informed its staff of several hundred that it planned to shutter operations in less than 60 days.
The distributor blamed the closure on a variety of undisclosed negative business issues, including the ability to return product to vendors (i.e. movie studios and record labels), according to an Aug. 3 letter to employees.
Liquidation of ERI's assets has been assigned to Michael Moecker & Assoc., in Ft. Lauderdale.
ERI's DVD assets number more than 1.8 million units, including about 800,000 returns, according to an Aug. 14 legal filing with the Circuit of the 17th Judicial Circuit of the State of Florida in Broward County. ERI expects the number of returns to increase substantially under purchase agreements with vendors.
According to the filing, PNC, a Boca Rattan-based secured lender for the banks, controls 92% interest in ERI's DVD inventory, with Buena Vista Home Entertainment and 20th Century Fox Home Entertainment holding interest in 3% and 5%, respectively, of the remaining inventory.
The filing stated it was “highly unlikely” liquidation of the DVDs and other assets would satisfy secured creditors, let alone unsecured creditors.
Moecker requested the right to retain 24 ERI employees to process returns, in addition resources needed to maintain an ERI warehouse facility, security, insurance, freight and related fees associated with the asset sale.
“Our goal is to keep the assets of the company alive and active until we find a potential buyer who is interested in buying the remaining assets,” said Phil von Kahle, managing director of Moecker.
Representatives from Buena Vista and Fox were not immediately available for comment.