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| From | Scotthomewood@cs.com |
| Subject | Closing the Tower |
| Date | Sat, 7 Oct 2006 07:36:48 EDT |
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Group Plans to Liquidate Tower Records
By RANDALL CHASE
WILMINGTON, Del. (AP) - After a lengthy auction stretching over two days, a
federal bankruptcy judge on Friday approved the sale of California-based Tower
Records to Great American Group, which plans to liquidate the music retailer.
After almost 30 hours of what attorneys described as ``robust'' and
``vigorous'' bidding, Great American won with a bid of $134.3 million, beating Trans
World Entertainment, which had hoped to continue operating at least some Tower
stores, by a single bid increment of $500,000.
Peter Gurfein, an attorney representing Tower Records, said the company will
be sold for an aggregate of $150 million, including the sale of various leases
and properties.
Gurfein said Great American plans to begin the liquidation process and going
out of business sales on Saturday, which eventually will result in the
elimination of the jobs of some 3,000 Tower employees.
``This is not an easy decision,'' said bankruptcy Judge Brendan Shannon, who
nevertheless noted that the Tower debtors and other parties had agreed the
bidding process was conducted fairly and in good faith.
Tower Records, which has 89 stores in 20 states and owes creditors about $200
million, filed for Chapter 11 reorganization in August. In its filing, the
company said it has been hurt by an industrywide decline in music sales,
downloading of online music and competition from big-box stores such as Wal-Mart.
Tower's Chapter 11 filing came two years after initial reorganization that
resulted in bondholders forgiving millions of dollars in debt but taking an 85
percent stake in the company, leaving founder Russ Solomon and his family with
15 percent.
Solomon founded Tower in Sacramento, Calif., in 1960, starting by selling
records out of his father's drug store and eventually opening the company's
landmark store on Hollywood's Sunset Boulevard in 1969. As part of the bankruptcy
auction, the Sunset property will be sold for $12 million.
Michael Bloom, an attorney representing Tower's secured trade creditors,
urged Shannon to consider the closeness of the bids and the effect that
liquidation would have before deciding whether to approve the sale.
``We can save this company or we can liquidate it,'' Bloom argued. ``...
Sometimes, the highest bid is not the best bid. In this case, your honor, we
believe the best bid is the Trans World bid.''
Trans World, which has about 1,100 mostly mall-based stores nationwide, has
recently acquired other music retailers such as Sam Goody and Wherehouse Music,
consolidating most of its acquisitions under the FYE name, which stands for
For Your Entertainment.
Tim Pohl, an attorney representing Trans World, asked the judge whether
$500,000 was ``a material enough difference'' to liquidate a company, as opposed to
keeping thousands of people employed.
But Jay Indyke, an attorney for Great American, said Trans World and its
bidding partners had discussed liquidating inventory and closing about two dozen
Tower stores, and that they would not say how many stores they would continue
to operate.
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