BERIGAN Posted February 5, 2004 Report Share Posted February 5, 2004 Don't tell me stores aren't going to close! Sources: Tower Records to Seek Chapter 11 Thu February 5, 2004 09:27 AM ET By Dane Hamilton NEW YORK (Reuters) - MTS Inc., the parent of high-profile entertainment retailer Tower Records, plans to file soon for bankruptcy protection after failing to find a suitable buyer, people familiar with the situation told Reuters on Thursday. A Chapter 11 filing for protection from creditors by MTS would cap a long period of financial distress for privately held Tower, a chain of nearly 100 stores located mainly in the United States that sell music and video entertainment in various formats. The Chapter 11 fling will involve a major debt-for-equity swap that would likely switch control of the company from the founding Sacramento, California-based Solomon family to creditors that include bondholders and banks, sources said. Like other retailers in the recorded entertainment industry, Tower suffers from stiff competition from mass market retailers such as Wal-Mart Stores Inc. (WMT.N: Quote, Profile, Research) and high costs from retail leases. Digital downloading and file copying has hammered sales and led to widening losses, the company has said. The bankruptcy filing is likely to happen within the next week in Delaware, barring last minute hitches or objections from creditor groups working to hammer out the "prepackaged" bankruptcy plan. Most creditors appear to have agreed to the plan, sources said. The plan, which must be approved by a bankruptcy judge, won't involve significant store closings or employee layoffs, or even a liquidation, as some feared. But some observers say the long-term future of the glitzy store chain founded in 1960 is clouded, particularly due to competition from digital downloading, a medium that doesn't require expensive retail locations. "How do you compete with free?" asked William Brandt, chief executive of restructuring firm Development Specialists Inc., referring to competition from Internet music downloading. "They need to look for an industry-wide solution to the problem which they failed to lead. A better solution has to be found." Tower teetered toward bankruptcy last year when it defaulted on $5.2 million in coupon payments on a $110 million bond issue. It then hired investment bank Jefferies & Co. (JEF.N: Quote, Profile, Research) to help negotiate with bondholders and Los Angeles-based Greif & Co. to help find buyers under a forbearance agreement from lenders. The year before, it sold its top-performing Japanese division for $129 million, but the sale failed to stem a loss of sales due to shifting consumer demands. In a regulatory filing last April, MTS reported debt of $441.9 million, including $194.5 million in bank and bond debt, along with $247.4 million in operating leases. Sales for the nine months to April 2003 fell 9 percent to $429 million, while losses rose 47 percent to $36.3 million, said MTS in the filing. http://www.reuters.com/newsArticle.jhtml?t...storyID=4292579 Quote Link to comment Share on other sites More sharing options...
7/4 Posted February 5, 2004 Report Share Posted February 5, 2004 They came pretty close to this a few years ago... Quote Link to comment Share on other sites More sharing options...
Jim Alfredson Posted February 5, 2004 Report Share Posted February 5, 2004 I was upset when the local Tower Records closed in East Lansing. I spent far too much money there. At the same time, becaue of their closing, I saved a lot of money by ordering online. The prices were ridiculous in the store itself. The times, they are a changin'... Quote Link to comment Share on other sites More sharing options...
Eric Posted February 5, 2004 Report Share Posted February 5, 2004 Indeed. There is only one true new record store left in KC and their jazz selection and prices are pretty bad. I buy almost everything online these days - you even get the worlds best used CD store with Amazon. I used to go to Tower in NY and SF on business trips 10-15 years ago and loved the experience. Decent prices, great selection, imports out the wazoo. The internet has changed all that ... Eric Quote Link to comment Share on other sites More sharing options...
Tjazz Posted February 5, 2004 Report Share Posted February 5, 2004 Guess I better use up my Tower Credit certificates. Where will I return those SEALED cds? Quote Link to comment Share on other sites More sharing options...
Stefan Wood Posted February 5, 2004 Report Share Posted February 5, 2004 At Borders. Quote Link to comment Share on other sites More sharing options...
undergroundagent Posted February 5, 2004 Report Share Posted February 5, 2004 (edited) This story sounds similiar to what happened to "Sam the Record Man" in Canada. At one time, Sam's was the country's foremost retailer of music, but they drastically went downhill with the creation of new stores such as HMV, Music World & Sunrise. Eventually, Sam's closed all their Canadian stores save the mega store in downtown Toronto. It still exists there, and has one of the best selections of jazz that I've ever seen, but the story was still sad as the chain was family owned for over 40 years. Edited February 5, 2004 by undergroundagent Quote Link to comment Share on other sites More sharing options...
Dave James Posted February 5, 2004 Report Share Posted February 5, 2004 I guess I'm not surprised. Tower isn't very diversified, and this kind of niche marketing operation is going to stuggle in the face of the online Hun. We used to have two Tower outlets in Portland. One closed a couple of years ago but the other is still kicking. They had a two hour customer appreciation sale last Friday with all CD's and DVD's 30% off. Hopefully, they'll stick around long enough to have a few more of those. Up over and out. Quote Link to comment Share on other sites More sharing options...
Out2Lunch Posted February 5, 2004 Report Share Posted February 5, 2004 I'm not surprised either. They gave up the lease to the great store they had on Newbury and Mass Ave in Boston to Virgin years ago and opened up a real slipshod store next to Fenway Park which closed after about a year. The other stores which they have in Burlington and Cambridge have poor selection of jazz and clasical, not to mention high prices. I have never been too thrilled with their internet operation either. They never got a handle on their inventory as far as I am concerned. I have saved myself a lot of $$ not to mention mileage and time by dealing with CD Universe, although I do miss browsing at a brick & mortar location sometime. Quote Link to comment Share on other sites More sharing options...
Dmitry Posted February 5, 2004 Report Share Posted February 5, 2004 Just checked my cattrax database. I bought more than 400 cds from both Tower stores in NY since 1999. I guess this news is a blessing in disguise. Quote Link to comment Share on other sites More sharing options...
scottb Posted February 5, 2004 Report Share Posted February 5, 2004 I'll guess I'll start putting money aside for the big on line GOING OUT OF BUSINESS SALE! I never lived too close to a Tower. The closest was New Orleans and their selection was great. Found all kinds of OOP Blue Note there last time I went. Now I'm about 10 hours away instead of 90 minutes. Quote Link to comment Share on other sites More sharing options...
BERIGAN Posted February 6, 2004 Author Report Share Posted February 6, 2004 I'll guess I'll start putting money aside for the big on line GOING OUT OF BUSINESS SALE! I never lived too close to a Tower. The closest was New Orleans and their selection was great. Found all kinds of OOP Blue Note there last time I went. Now I'm about 10 hours away instead of 90 minutes. Is Not Given west of New Orleans???? Quote Link to comment Share on other sites More sharing options...
BruceH Posted February 6, 2004 Report Share Posted February 6, 2004 I'm not surprised either. They gave up the lease to the great store they had on Newbury and Mass Ave in Boston to Virgin years ago and opened up a real slipshod store next to Fenway Park which closed after about a year. The other stores which they have in Burlington and Cambridge have poor selection of jazz and clasical, not to mention high prices. I have never been too thrilled with their internet operation either. They never got a handle on their inventory as far as I am concerned. I have saved myself a lot of $$ not to mention mileage and time by dealing with CD Universe, although I do miss browsing at a brick & mortar location sometime. That large store on the corner of Newbury & Mass Ave was, for a few years, absolutely great. By the time they moved though, the selection had already gone downhill. Is Stereojacks still in Cambridge? Quote Link to comment Share on other sites More sharing options...
catesta Posted February 6, 2004 Report Share Posted February 6, 2004 DAMN! We have a newer Tower here on the north side of town with a great jazz section. I will be sad if it goes. Quote Link to comment Share on other sites More sharing options...
7/4 Posted February 9, 2004 Report Share Posted February 9, 2004 NY Times Parent of Tower Records Files for Chapter 11 By THE ASSOCIATED PRESS Published: February 9, 2004 Filed at 10:35 a.m. ET WEST SACRAMENTO, Calif. (AP) -- The parent company of Tower Records, the pioneering record retailer that invented the music megastore, has filed for bankruptcy, the company announced Monday. MTS Inc., the privately held parent of the West Sacramento-based chain, said it has filed a prepackaged plan of reorganization and voluntary petitions for reorganization under Chapter 11 as the concluding step in a debt restructuring that began in May 2003. The company filed in U.S Bankruptcy Court in Wilmington, Del. ``Court approval of the prepackaged plan will reduce existing debt by $80 million, effectively eliminating the financial risks that have faced Tower for the past three years,'' chief executive E. Allen Rodriguez said in a news release. ``Our issues are financial, not operational ... and we expect the prepackaged reorganization to be concluded quickly.'' The company said it expects to receive plan confirmation and successfully complete the reorganization within 60 days. The filing comes nearly a year after MTS decided to sell Tower because it could not pay off $5.2 million in debt. Tower Records was launched with a single store in 1960 and soon became internationally recognized for its in-store concerts and a deep selection of both popular and obscure music. But the chain has fallen victim to a slump in the music business and its own missteps in a rapidly changing retailing environment. Tower Records owns 93 stores, down from 171 during its heyday when annual sales topping $1 billion were routine. The retailer's decline began in 1998 as falling sales, lack of hits and discounters such as Best Buy and Wal-Mart cut into profits of traditional record stores. Business will continue as usual during the reorganization, Rodriguez said, and customers and employees of Tower stores will not notice any difference as a result of the filing. Quote Link to comment Share on other sites More sharing options...
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