Co. also preparing going-out-businesses sales.
In first day (Jan. 13) motions in the Chapter 11 filing of the Musicland Group in the U.S. Bankruptcy Court for the Southern District of New York, it was revealed the company is up for sale with the goal of a prompt transaction. But if such a deal doesn't achieve substantial enough value for creditors, Musicland management is preparing to scale down and reorganize the company, and file a stand-alone plan.
To that end, Musicland plans going-out-of-business sales for 284 stores beginning Feb. 1. But in ruling on the motions, some of the mechanisms that will allow those sales to proceed were delayed until the next hearing, scheduled for Jan. 27, by the Judge, Stuart M. Bernstein.
Currently, Musicland had 869 stores, of which 456 are Sam Goody stores, 352 are Suncoast Motion Picture stores and 61 are Media Play stores. The latter stores have almost completed a liquidation begun in December. A breakout of the subsequent 284-store closing was not detailed at the hearing.
The "DIP" (debtor-in-possession) financing was approved in spirit by the Judge, pending the final wording of the loan documents containing modifications hammered out in court. At the court, it was revealed that the pre-petition $200 million revolving credit facility, secured by Musicland's inventory, is currently only $30 million drawn down, likely thanks to the fact that Musicland didn't make any December product payments.
As it stands, the chain's lawyer, James Stempel of Chicago-based Kirkland & Ellis, stated the company's assets at $371 million and liabilities at $485 million. The court directed Musicland to set in motion a process that would result in an unsecured creditors committee to be formed by Jan. 20.