The U.S. Bankruptcy Court in Wilmington, Del., approved most of Tower Records’ first-day motions today (Feb. 10), including the ability to pay pre- and post-petition debt.
“That motion effectively means we can pay our trade debt in the ordinary course of doing business,” says Allen Rodriguez, CEO of the West Sacramento, Calif.-based chain.
In addition, the judge approved the debtor-in-possessing financing from the bank group let by CIT Group/Business Credit, which will give Tower more credit availability than it had from the revolver. And the court is allowing the chain to use cash collateral; namely, the money it collects daily in stores from selling merchandise.
“It was a highly unusual move and very much reflective of our highly unusual situation,” Rodriguez says. “Within 24 hours of the world hearing the ‘b-word,’ they are hearing some very aggressive responses to our positive situation.”
The hearing for confirmation of Tower’s re-organization plan has been set for March 15. This means that if approved, Tower will have the shortest stay in Chapter 11 of any company in the music industry in at least 10 years.
“It was a great day for Tower and a real vote of support for all the work that Tower management has done up to this point,” says Michael Bloom, a partner with Philadelphia law firm Morgan, Lewis & Bockius LLP, which is representing the five major music suppliers and six large video vendors.
“I told the judge one of the reasons why Tower has enjoyed the strong support of the [major vendors] throughout 2003 is the high level of confidence we have in the leadership of Allen Rodriguez and [CFO] Dee Searson.”