Tower Records Goes Out Of Business, Sold For $150 Million
Last Friday (October 6th) marked the end of a two day bankruptcy auction for the sale of Tower Records, when federal bankruptcy Judge Brendan Shannon approved the sale of the Sacramento-based retailer to Great American Group for $134.3 million dollars. Great American beat out Trans World Entertainment (who had hoped to continue running some of Tower's stores) by only $500,000.
Tower operates some 90 stores and franchises worldwide. Great American has said they plan to begin the going out of business sale and liquidation process immediately. That process will cost over 3,000 Tower employees their jobs.
With debts amounting to around $200 million, Tower Records filed for Chapter 11 reorganization in August. At the time of filing the retailer said they have been hurt by the sweeping decline in music sales across the industry, music downloading and competition from super-stores like Wal-Mart.
The Chapter 11 filing followed an initial reorganization two years ago, when bondholders forgave millions in debt by taking an 85 percent stake in the company, leaving founder Russ Solomon with 15 percent.
Several attorneys present tried to dissuade the judge from approving the higher bid, including Michael Bloom, who represents Tower's secured trade creditors.
"We can save this company or we can liquidate it,'' Mercury News quoted Bloom's argument. ". . . Sometimes, the highest bid is not the best bid. In this case, your honor, we believe the best bid is the Trans World bid.''
Tim Pohl, who was present to represent Trans World, asked whether $500,000 was ``a material enough difference'' to liquidate a company, when thousands of people might otherwise be kept employed.
Trans World owns some 1,100 stores in the US, including the recently acquired music retailers Sam Goody and Wherehouse Music. Most of their acquisitions have been consolidated under the FYE name (For Your Entertainment).
However, Jay Indyke, an attorney for Great American told Mercury News that Trans World and its bidding partners had also discussed liquidating inventory and closing about two dozen Tower stores, and that Trans World did not specify which stores they'd continue to operate.
Shannon admitted that his final decision was not an easy one, but in the end everyone present agreed that the bidding process had been conducted fairly.
Peter Gurfein, an attorney representing Tower, said the company will be sold for an collective total of $150 million, including the sale of various leases and properties.
Tower was founded by Solomon in Sacramento in 1960, when he began selling records out of his father's drug store. He eventually opened the company's landmark store in 1969 on Hollywood's Sunset Boulevard. As part of the bankruptcy auction, the Sunset property will be sold for $12 million.