Tower Files Chapter 1121 Aug, 2006 By: Erik Gruenwedel
Venerable but financially troubled MTS Inc., parent of Tower Records and Video, has filed for bankruptcy protection for the second time in two years.
The Aug. 20 filing with the U.S. Bankruptcy Court for the District of Delaware listed West Sacramento, Calif.-based Tower's debts and assets in excess of $100 million, respectively.
Tower said it had entered into an $85 million debtor-in-possession financing agreement with its banks, which include Barclays Bank, Highland Capital Management, AIG Global Investment Corp., MW Post Advisory Group and founder Russell Solomon.
Notable video creditors include distributor Ingram Entertainment ($760,084), Image Entertainment ($750,592), Ventura Home Entertainment ($427, 711), BCI Eclipse Co. ($287,104) and Baker & Taylor ($197,969).
Representatives from the distributors were not immediately available for comment.
Subject to court approval, Tower said it will use the funds to maintain operations with the goal to sell the company within 60 days of the filing date.
“Tower Records has conducted an extensive sale process, and this step will allow buyers to complete a sale in time for the holiday season while maximizing the value for stakeholders,” said Joseph D'Amico, Tower's interim CEO.
In March, Tower hired mergers and acquisition specialist Houlihan Lokey Howard & Zukin to sell the company. D'Amico said Tower is evaluating letters of intent from interested parties who “recognize the strength of the brand and its unique position within the marketplace, making it a very attractive opportunity.”
He said the funding would allow Tower to continue ordering product and said the retailer has renegotiated delivery terms within the industry.
“The trade has always supported Tower through difficult times, and we recognize that their support is imperative to the consummation of a transaction,” D'Amico said.