SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report Pursuant to Section 13 or 15 (d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported ): July 14, 1997
ALLIANCE ENTERTAINMENT CORP.
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(Exact name of registrant as specified in its charter)
Delaware 1-13054 13-3645913
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(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of incorporation) Identification No.)
110 East 59th Street, New York, New York 10022
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 935-6662
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Item 3. Bankruptcy or Receivership
On July 14, 1997, Alliance Entertainment Corp. (the "Company") filed
voluntarily to reorganize under Chapter 11 of the Bankruptcy Code in order to
facilitate the reorganization of the Company's core businesses and the
restructuring of the Company's long-term debt, revolving credit and trade
obligations. The Company will continue to operate as debtor-in-possession with
its existing directors and officers, subject to the court's supervision and
orders. Excluded from the filing were certain businesses in the Company's
Proprietary Products Group: Castle Communications plc; The St. Clair
Entertainment Group, Inc.; and Red Ant Box Inc. The filing was made in the U.S.
District Court for the Southern District of New York in Manhattan.
The Company has entered into a loan agreement with a syndicate of banks led
by Chase Manhattan Bank that provides for approximately $50 million of
debtor-in-possession ("DIP") financing subject to interim and final approval by
the court.
Certain matters discussed in this report are forward-looking statements
intended to qualify for the safe harbors from liability established by the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements can generally be identified as such because the context of the
statement will include words such as the Company "believes," "expects" or words
of similar import. Similarly, statements that describe the Company's future
plans, objectives, estimates or goals are also forward-looking statements. Such
statements address future events and conditions concerning capital expenditures,
earnings, sales, liquidity and capital resources, and accounting matters. Actual
results in each case could differ materially from those currently anticipated in
such statements, by reason of factors such as future economic conditions,
including changes in customer demand, legislative, regulatory and competitive
developments in markets in which the Company operates; and other circumstances
affecting anticipated revenues and costs.
Item 7. Financial Statements and Exhibits
(c) Exhibits
Exhibit 99.1 Press Release dated July 14, 1997
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALLIANCE ENTERTAINMENT CORP.
By: /s/ Christopher J. Joyce
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Name: Christopher J. Joyce
Title: Executive Vice President,
General Counsel and
Assistant Secretary
Date: July 16, 1997
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EXHIBIT INDEX
Exhibit 99.1 Press Release dated July 14, 1997.
NEWS RELEASE
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SITRICK AND COMPANY, INC. Contact: Sitrick and Company
Los Angeles/New York Sandra Sternberg
(212) 935-6662 ext. 234
Rivian Bell
(800) 329-7664 ext. 4086
Patrick Lee
(800) 329-7664 ext. 4091
OR
(310) 788-2850
Alliance Entertainment Corp. To Restructure Debt
Under Chapter 11
Excludes Castle Communications, Red Ant and
St. Clair Entertainment from Filing
New York, N.Y. -- July 14, 1997 -- Alliance Entertainment Corp. (NYSE: CDS),
one of the largest full-service distributors of prerecorded music and related
products and a developer and marketer of new artist and catalog proprietary
content in several genres, today filed voluntarily to reorganize under Chapter
11 of the Bankruptcy Code in order to facilitate the reorganization of the
Company's core businesses and the restructuring of the Company's approximately
$322 million of long-term debt and revolving credit and $204.1 million in
trade and similar obligations at May 31, 1997.
Excluded from today's filing were certain businesses in the Company's
Proprietary Products Group: Castle Communications, the Company's U.K.-based
catalog and re-issue label; St. Clair Entertainment Group, its Canadian
subsidiary; and Red Ant, the Company's Los Angeles-based new release product
label specializing in alternative rock and urban music. The Company said that
the exclusion of Castle and St. Clair was related to their status as non-
domestic entities; and that the exclusion of Red Ant related to the fact that
the Company is in discussions with potential buyers regarding its sale.
In addition to considering possible sale transactions with respect to Red
Ant, the Company said it anticipates that it will continue its pre-filing
discussions as to certain financing transactions related to Alliance and, in
that regard, announced that it has received a preliminary proposal for
consideration from a third party with respect to a $50 million equity
investment to be made in connection with a plan of reorganization for the
Company.
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Alliance confirmed that it has entered into a loan agreement with a
syndicate of banks led by Chase Manhattan that provides for approximately
$50 million of debtor-in-possession (DIP) financing for the filing entities.
Pending interim and final Court approval, the $50 million financing will enable
the filing entities to continue operations uninterrupted, purchase new goods,
improve customer service and fill rates at the distribution businesses, work
its catalog companies, develop and manufacture records in the content businesses
and improve operating margins in all businesses. Additionally, the Company
said that it anticipates return to normalized trade credit in the near future
with major suppliers that produce and supply the majority of the industry's
prerecorded music.
The Company today requested Court approval for the use of $3 million in cash
collateral pending interim approval of the DIP financing, which is expected to
be approved by the Court as early as Wednesday.
"Alliance's growth through acquisition resulted in the accumulation of
burdensome levels of debt and interest expense at a time of little or no growth
in the domestic music industry," said Al Teller, chairman, chief executive
officer and president. "Operationally, our previously announced consolidation
plan for the distribution-related businesses has been achieving the anticipated
efficiencies. However, principal and interest payments, as well as the
Company's current operating losses, continue to drain cash that it needed to
operate our business on a competitive basis.
"The filing will not only enable us to achieve an orderly reorganization of
the debt and interest to servicable levels, but it will also allow us to
eliminate certain operating costs and significantly strengthen our balance
sheet. The new financing is a vote of confidence by the financial community
that will permit us to resume competitive purchasing of goods for the benefit
of thousands of retail customers in our distribution business and result in a
positive effect on all filed entities."
Eric Weisman, the Company's chief operating officer, said, "Alliance has
many strong, well-established businesses that are profitable at the operating
level. Our focus in the coming weeks will be to continue building value in
these businesses, to reinforce our ongoing relationships with music suppliers,
and to strengthen our customer relationships by enhancing service levels.
We have top-level industry professionals operating our businesses, and I am
looking forward to working closely with the unit presidents to build a cohesive,
unified management team throughout the Alliance enterprise."
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Mr. Teller said that he anticipates that daily operations of the filing
entities will continue uninterrupted, and that those businesses will proceed
with substantially more liquidity than has been available in recent months.
"I anticipate that employees of the filing entities will continue to be paid,
and customer orders will be filled promptly. Insofar as our suppliers are
concerned, we have been in constant contact with the major suppliers, and we
are confident that they will continue to work with us going forward.
"Alliance's distribution capabilities are virtually unmatched in the
industry. As a result of the segmentation of the marketplace, there are new
business opportunities in distribution that show far greater growth potential
than we have realized to date," Mr. Teller stated. "We have a responsibility to
our customers, employees, vendors and shareholders to maximize assets and to
create an appropriate financial structure that will permit us to take greater
advantage of high-growth, high-return opportunities."
As of May 31, 1997, the Company's total assets were $512.4 million, including
$93.6 million of related costs in excess of assets acquired. The Company's
total obligations as of May 31, 1997, were approximately $536.3 million, which
consisted of: (i) $137.2 million under a revolving credit agreement; (ii)
$39.5 million in term debt; (iii) $204.1 million in trade and similar
obligations; (iv) $125.0 million in 11.25% Senior Subordinated Notes due 2005;
(v) $10.0 million in 6% Exchangeable Notes; and (vi) $6.7 million in mortgage
bond in conjunction with the Company's distribution facility in Coral Springs,
Fla. The Company's interest payments were estimated to total $35 million
annually.
Alliance Entertainment Corp. is a fully integrated, independent music
company with more than 1,300 employees in the United States, Canada and the
United Kingdom. The Company maintains corporate headquarters in New York
and operations headquarters at its facility in Coral Springs, Fla.
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