Valley Media to Liquidate Assets17 Jan, 2002 By: Joan Villa
Bankrupt distributor Valley Media, once a dominant player in the music and video sellthrough markets, is in the process of liquidating all assets and will not emerge from Chapter 11 bankruptcy.
The Woodland, Calif.-based wholesaler is taking bids on inventory it estimates is worth approximately $88 million and will follow with bids on recoverable receivables valued at roughly $90 million, said president Lew Garrett, who is the only executive remaining to complete the process.
"Valley Media will be no more when it is finished," he said.
CEO Peter Berger left after the company filed Chapter 11 bankruptcy in November, listing debts of approximately $210 million. Some 200 employees remain to man the company's two distribution centers through the end of next month to ship product sold in the bidding process – "a far cry from the 2,400" at Valley's employment peak, Garrett acknowledged.
Last week Valley accepted a high bid for its DVD Advance catalog publication, from music wholesaler Alliance Entertainment of Coral Springs, Fla., which is scheduled to be approved by the bankruptcy court at a hearing Jan. 30. The court, along with secured creditor Congress Financial and the committee of unsecured creditors, has already approved the sale of another intellectual property, Valley's Audiofile database that includes Schwann Publications, to Alliance.
Any merchandise that remains unsold after the bidding process will be subject to a live auction and webcast Feb. 8, managed by The Great American Group in Woodland Hills, Calif., he added.
"It's the end of an era," summed up Wayne Mogel, former president of Star Video, the distributor acquired by Valley more than four years ago to bring the music wholesaler into the video arena.
Garrett, who joined the company in mid-2000 after he said it was too late to "put out the fires," explained that Valley filed Chapter 11 with the hope it would be able to "work things through and emerge" even though its chances were "extremely limited."
"This course was determined several years ago" starting with the acquisition of Star for $45 million, he continued. "If you're going to acquire a company, you'd better understand it and be able to integrate it into your existing business."
Three years after the Star acquisition, Valley was still grappling with a video overstock problem to the tune of $25 million to $30 million in excess inventory, according to company founder Barney Cohen, who had stepped in as interim CEO to try to better integrate video into the music wholesaler's operation.
Meanwhile, Alliance, another music distributor that went through Chapter 11 and successfully emerged in the late 1990s, appears poised to fill the vacuum left by Valley.
Sources familiar with the distributor's operations said Alliance is moving to expand its DVD selection in music stores but is also pursuing video accounts.
"On the music side, they're king of the hill right now," said Ted Engen, whose 2,000-store Video Buyers Group has in the past purchased music product from the distributor. "They're expanding [into DVD] very slowly and very cautiously. They don't want to get caught up in the same problems that Valley did."