A discusion about Us Bankruptcy Record

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Q. Looks like the bankruptcy is finally going to go through for long-time zine friendly music store, Tower Records. From what's being said, the company still has a shot at pulling itself out of the potentially devastating financial downward-spiral. One article states: "The bankruptcy filing is likely to happen within the next week in Delaware, barring last minute hitches or objections from creditor groups working to hammer out the "prepackaged" bankruptcy plan. Most creditors appear to have agreed to the plan, sources said. The plan, which must be approved by a bankruptcy judge? won't involve significant store closings or employee layoffs, or even a liquidation, as some feared."

A. -I'm sure glad to hear that. Tower Records is really a patron of zines if you ask me, maybe the only ligit corporate one there is. Is that overstating things? -Well, now that someone has broached the subject, I'm happy to give everyone as much detail as I'm able. Here's a brief version of the story, more or less from the beginning: Around the year 2000 Tower realizes that we must do something soon, or the company will sink under our enormous debt load. We owe lots of money. The next few years see a lot of changes. Stores that lose money are fixed or closed. Overseas operations are closed (like Argentina and England) or franchised (Ireland). The main office reorganizes, lays a lot of people off, and hires outside folks to do some of the stuff we used to do ourselves. Buying processes are "streamlined". In 2002 we sell Tower Japan. We're making more money at the stores, and the sale of the Japanese chain reduces our debt dramatically. We still owe a lot, but things look good. In June 2003 we do not make an interest payment on the biggest part of our debt, public bonds we sold in 1998 totalling $100 million. We skip this payment not because we don't have the money (we did), but because we realize that we probably won't have $100 million cash to pay back the bonds when they come due, and we have to find another way to deal with the debt. Much is made of Tower's "inability" to pay- coming to nothing, because all the banks and creditors know what is going on, and they're cool with the way things are progressing. Now we're getting more to current events. In October 2003 we initiate what is called a "debt for equity swap." Essentially, we told the bondholders that in order to get the money they would need to exchange the debt for some ownership of Tower. In this way they avoided bankruptcy, which would have gotten them nada. Okay. The company is put up for sale, because the bondholders want to cash out- they didn't buy those bonds to get into the record retail business, after all. Our holiday sales were good, so there are some good, competitive bids for the company (though I have no idea from who). And just so you know, I'm now treading lightly on current info, of which some is still confidential. So I'm going to skip to the bankruptcy itself. We go to the bankruptcy judge Monday. Most bankruptcies involve the company asking for time to reorganize and create a plan to return to profitability, and for protection for vendors/creditors clamoring for money they're owed. We are not doing that, in large part because we've already done all our reorganization and we've already returned to profitability. We will be asking that the judge approve a plan that has already worked, so that should be no problem. We're also *NOT* asking for protection from our vendors and other creditors (like landlords and so on). We will conduct business as usual, make payments on the usual schedules under the usual terms. As some of the internet stories note, our creditors know what is going on, and they're backing us up (for the most part). The major audio labels like Sony, Warner, BMG, Universal, and so on, understand and support us (and yes, many don't like major labels, but we'd really go under without them!). Ditto for the video, book, and magazine companies. On top of this we also have something most bankrupt companies don't: banks who have already agreed to finance us through the brief period of upheavel, and after, once the dust settles. The end result is that we are profitable, have solid sales, and our prospects for the future are good. Most important for readers of this newsgroup: we're still going to be distributing and selling zines, no one is going to get ripped off, and all our current zine accounts should see nothing different from the way we've always conducted business. I've already spoken with several zine people, and they're no longer nervous. (On the other hand, everyone should remember Fine Print, and I’d certainly understand if people wanted to hedge their bets and wait and see.) Okay- if there are any questions, I'm happy to answer them. Post here, email me directly, or feel free to call (916-373-2539). I'll have to write a letter to Fred Woodward and Violet Jones, though, or they'll never know about this stuff.

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