Chain in process of liquidating 61 Media Play stores.
As expected, the Musicland Group filed for Chapter 11 protection late Thursday afternoon in the U.S. Bankruptcy Court Southern District of New York.
The chain has been experiencing financial difficulties since the banking consortium providing its revolving credit facility stopped allowing the company to freely access funds and cash from the facility in early December. Consequently, the suppliers didn't get paid that month and in turn began forcing the chain to pay cash up front for all product purchases.
The Chapter 11 filing was expected earlier this week, but last minute wrangling in negotiations for the "DIP" (debtor-in-possession) loan delayed the company's appearance at the court. In filing for Chapter 11 protection, the company says that its banking consortium, led by Wachovia Bank, is providing a $75 million DIP loan.
Wachovia acquired Congress Financial, the bank that originally was lead in the Musicland revolving Credit Facility in 2004 and in 2005 it stopped using the latter name.
Musicland is already in the process of liquidating 61 Media Play stores, and sources say that earlier this week it was accepting bids from liquidators for the next round of store closures.