TOWER FILES FOR PREPACKAGED BANKRUPTCY

Tower Records’ parent company, MTS Inc., has announced that is has file Chapter 11 bankruptcy with a pre-packaged plan of reorganization. A release from the company says that the plan will reduce the company’s debt by $80 million and that it has already received the necessary votes from bondholders and shareholders for the plan.

The filing comes almost a year after MTS decided to sell Tower because it could not pay off $5.2 million in debt. Tower has 93 stores in the U.S.

Said Chief Executive, E. Allen Rodriguez: “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. Our issues are financial, not operational ... and we expect the prepackaged reorganization to be concluded quickly.”

MTS says is that the reorganization should be complete within 45 to 60 days. The company’s lender group, led by CIT Group/Business Credit has agreed to amend and improve MTS’s financing to provide interim financing of up to $100 million. MTS has also obtained commitment to amend is existing credit facility to provide $100 million term and revolving loan facility once the reorganization plan has been confirmed.

The plan provides for full payment to vendors for any pre-bankruptcy petition obligations, and the company is asking the court to allow it to pay all pre-petition obligations to its regular vendors in the course of business. Good news for labels.

MTS filed for bankruptcy in U.S. Bankruptcy Court in Wilmington, DE.