Musicland Files For Bankruptcy12 Jan, 2006 By: Erik Gruenwedel
Musicland Holding Corp., operator of more than 800 retail stores, including Sam Goody, Suncoast Motion Picture Company and MediaPlay.com, Thursday filed for Chapter 11 bankruptcy protection.
The Minneapolis-based company, which filed the petition in the U.S. Bankruptcy Court for the Southern District of New York, stated the action was necessary in order to complete undisclosed restructuring initiatives and to refine its business model.
Musicland said it has received $75 million in debtor-in-possession financing from existing creditors enabling it to remain open during the restructuring period.
Last month, Musicland announced it would shutter 61 Media Play stores over the next few months.
Media Play was the chain's larger-format stores, averaging about 46,000 square feet, compared to an average of 2,400 square feet for a Suncoast store and 4,700 square feet for Sam Goody locations. Media Play stores employed about 2,000 people in 18 states.
“We have been exploring various options for cutting costs, such as the impending closure of Media Play,” said Michael Madden, president and CEO of Musicland. “We believe the decisive action are taking provides the company with the most effective means to restructure our operations, strengthen our balance sheet and position us to compete more effectively in the current music and movies industry environment."