Trans World viewed as likely front-runner.

Although 16 bidders have come forward to participate in the Chapter 11 auction of Tower Records on Thursday (Oct. 5), odds are the chain will either be acquired by Trans World Entertainment or liquidated and sold off in pieces, say sources familiar with the situation.

Reason being, most of the suitors are bidding on specific assets and the only known "white knight" suitor is private equity firm Radius Equity.

While Trans World is considered the front-runner to buy the 89-unit chain in the auction, which will be held in Delaware, label executives who spoke to view the Chicago-based equity firm as their favorite by a longshot—if it can come up with the right ingredients to cement a deal.

Trans World's participation in the auction is comforting, according to the label executives, but the chain is viewed as a last resort buyer or a security net buyer. This view is taken by sales and distribution executives who believe that if Trans World buys Tower, the West Sacramento, Calif.-based chain will lose the special characteristics that they feel make the chain unique: its commitment to deep inventory and its willingness to take chances on new artists in all genres.

While Trans World maintains a deeper inventory than most chains, they equate its possible acquisition of Tower as a liquidation because the company’s culture and retail philosophy is vastly different from Tower's unique characteristics.

The label executives rooting for Tower to remain as a stand-alone chain are hoping Radius can pull off the deal. One thing in Radius’s favor is that the investment group includes two prominent music industry executives, Michael Ostin, who was a senior executive at DreamWorks, and Chic’s Nile Rodgers, the well-known producer and songwriter, who owns an independent distribution company, Sumthing Distribution.

But a Radius bid would also have to keep the debt component low and include a large infusion of equity, with further funding available for re-investment in the chain. Finally, Radius would have to bring in a high caliber retail executive to run the chain, and show a workable business plan to the majors, in order to get the major's confidence.

In addition to Radius, the Sacramento Bee reported that one of the other bidders, Orchard Capital, plans to bid on the chain and keep it operational. But music industry executives cautioned against that possibility because they have had no contact from the Los Angeles-based investment firm or any other private equity firm. Those executives say that just because a private equity firm may try to buy Tower doesn’t assure that they will receive credit from the majors for product going forward, if the labels, themselves, are not satisfied with the investment plans for the chain, its management team, and the financial wherewithal of the new owner.

Radius is believed to be still working on lining up its financing. Sources had suggested that Bayside Capital, another private equity firm that looked at Tower, might partner with them, but that hasn’t happened yet. Also, a foreign investor was also said to be considering investing in a Radius bid, but couldn’t determine if that is happening.

The other private equity firms that have looked at Tower over the last few years include Platinum Equity and HM Capital, but those two appear to have dropped from the chase, unless they are lurking behind some of the other bidders, like the one on the list known as 1965 Retail, which was unable to track down.

Meanwhile, Orchard Capital didn’t return repeated phone calls, but its Web site suggests that in addition to investing in companies, it also invests in real estate. Tower’s real estate holdings include the Sunset Blvd. location housing its world famous store there, as well as two parking lots, and a number of undervalued leases of stores that could be shuttered and sold. Those real estate assets are expected to see the most action at the auction. In addition to Orchard, at least five other bidders appear to be real estate companies: TMC Realty, L.L.C., West Hollywood Properties, Vornado Realty Trust, Champion Development Group, and two individuals who invest together in property, Larry Worchell and Ralph Horowitz.

Besides 1965 Retail, was unable to track down five other bidders, Norton LLC, Prescott Interests, SPI Holdings, BEC Inc, or Gamesource Inc. Of the latter, there appears to be multiple entities operating under the Gamesource logo, none of them have responded to inquiries about whether they are a suitor for Tower.

While was unable to narrow down what kind of companies those five suitors are and what kind of bid they made, sources say, one of them placed an offer solely for the online store, which is believed to have annual revenues of about $20 million to $25 million. In addition, Super D, which placed a bid under the name CD Listening Bar, also covets that asset.

The lead or “stalking horse" bidder remains Great American, which Tower has said in court documents, placed a bid valued at $90 million to $95 million on the chain’s inventory. Due to the amount of that bid, estimates that Trans World, Radius or any other bidder looking to buy all or most of Tower assets will have to come up with about $120 million, or the chain could be liquidated.

In addition to the $90 million to $95 million bid on the inventory; the real estate property is valued at $13 million to $20 million, depending on who you talk to; the online store is valued at $3.5 million; the lease on Manhattan uptown Tower store valued at $2 million; and the other store leases collectively worth about $2.5 million, according to sources. That adds up to $111 million to $123 million, and that’s even before the auction on Thursday, where participants likely will up whatever bid they placed to qualify.

Another possible scenario is Trans World joining forces with a liquidator like Hilco or Gordon Bros. to come up with the highest bid, something that it has done in the past with Wherehouse and Musicland.