Guidelines to be revealed Sept. 7.
The Tower Records asset auction is expected to heat up with the advertising of the bidding procedures in high profile business news publications tomorrow
Tower Records filed for Chapter 11 protection on Aug. 20.
According to Tower documents filed with the Delaware Chapter 11 court, an accelerated bid process is set to begin with a Sept. 12 deadline for suitors to submit letters of intent to buy the chain. The debtor and creditors hope that process yields a lead bid, also known as the stalking horse bidder, which will set the floor price that other bidders must compete against. After analyzing the bids to determine the one that offers the best possible return to creditor, the stalking horse is expected to be picked on Sept. 13.
Once the lead bid is determined, other bidders will have until Sept. 26 to put in a competing bid, as well as an executed asset purchase agreement, and evidence of the financial capability to complete the acquisition. The bidders will have time to perform due diligence and amend bids to be ready for an Oct. 5 auction, with a hearing set for the following day to approve the winning bid, with the sale closing Oct. 9.
If the stalking horse bid loses, the plan calls for that suitor to get back $500,000 in break-up fees and up to $200,000 in reasonable expenses, which means the other bidders must beat the lead bid by at least $700,000.
The judge questioned the need to compensate lead bid during first day motions, heard on Aug. 22, and delayed ruling on it until Sept. 15, according to sources in the court that day.