D.B. Zwirn will shut down the Sheridan Square operation as soon as it closes on the deal to take control of the company.

When that happens, label head Mike Olsen and the company's other 18 employees are expected to be let go, according to sources, who say the label will immediately be put up for sale. The acquisition is expected to close within a week. D.B. Zwirn did not return a call for comment.

Zwirn, a secured lender to Sheridan Square, foreclosed on the label's $35 million loan and put the assets up for sale in an auction, which it won by bidding $5 million. Once it establishes its clear ownership of the label -- the foreclosure and auction wiped out the equity controlled by the Stephens Group, Redux Records, and BTP Acquisition -- it will put the Sheridan Square assets up for sale.

The old Sheridan Square still exists, but it only has liabilities. Will retail get stuck holding the bag on the label's inventory?

"We are continuing to distribute all the titles on [Sheridan Square]," E1 Distribution president Michael Rosenberg says. "We are not deleting their titles or recalling them. [Retailers] shouldn't worry about [the inventory] until they hear from us."

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