Napster Inc. today (Nov. 1) won final approval of a $250,000 loan that the debtor company will use to cover expenses while it negotiates a sale of substantially all of its assets in a proposed $5 million deal. The bankrupt Internet music provider projects $200,000 in costs through Nov. 22 and $50,000 through Dec. 24, according to a budget submitted to a Wilmington, Del., court. Without the loan, the company would have to liquidate its assets.
Napster, based in Redwood City, California., filed for Chapter 11 bankruptcy protection on June 3. It listed assets of $7.9 million and liabilities of $101 million, as of April 30.
Napco Acquisition LLC is both the lender under the $250,000 loan and the prospective buyer of Napster. Napco Acquisition is an affiliate of an undisclosed public company that has asked to remain unidentified until an asset purchase agreement is signed, according Hobart G. Truesdell, the trustee overseeing Napster’s estate. Napster won emergency approval to borrow up to $200,000 under the loan on Oct. 21.
Chief Judge Peter J. Walsh of the U.S. Bankruptcy Court in Wilmington scheduled a Nov. 27 hearing to consider approval of the sale. Objections must be filed by Nov. 25.
At its peak, Napster attracted some 60 million users, but was crippled by legal showdowns with the world’s largest record companies, who accused the company of wide-scale copyright infringement.
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