Music distribution firm Alliance Entertainment received bankruptcy court approval Wednesday to obtain $20 million in interim debtor-in-possession financing from a syndicate of banks led by Chase Manhattan. The cash influx will allow the company, which on Monday filed for bankruptcy protection, to keep operating while it reorganizes.
According to sources, during an Alliance board of directors meeting Wednesday night, Al Teller, chairman, prexy and CEO of Alliance, agreed to step out of Red Ant Entertainment, clearing the way for a sale of the start-up label owned by Alliance. (Alliance Entertainment is not related to the Canadian film production company, Alliance Communications, which is in sound financial shape.)
Teller, who founded Red Ant last year following his exit as CEO and chairman of MCA Music Entertainment Group, is expected to relinquish all ties to the label.
As part of Teller’s move to the helm of Alliance, the music distribution company purchased Red Ant from Teller and investment banking firm Wasserstein-Perella, the latter backing the label’s bow with a $100 million credit line.
Bankers to take over
Teller’s exit from Red Ant will clear the way for W-P to buy the company from Alliance. But it must first receive bankruptcy court approval.
It is expected that after the sale, Red Ant will continue to operate through a distribution deal with BMG, though the name is expected to be changed.
On Wednesday U.S. District Court Judge Burton R. Lifland approved the $20 million infusion and scheduled a July 30 hearing to evaluate the need for an additional $30 million of DIP financing. The syndicate agreed to loan Alliance a total of $50 million.
In hearings on Monday and Wednesday, the court also approved Alliance’s requests for payment of certain wages and benefits, retention of its cash management systems and of legal and financial professionals. The company, however, is expected to significantly reduce overhead during the reorganization, which could include some staff layoffs of its 1,300-member workforce.
“We are pleased to have obtained prompt approval by the court on these matters,” said Teller. “And we are pleased that funds will be available today to purchase merchandise and other services.”
Off the Exchange
As a result of the bankruptcy filing, the New York Stock Exchange has permanently halted trading of Alliance’s common stock. The company also no longer meets the financial criteria for continued listing on the Exchange.
Alliance, which filed for protection a day before a $7 million interest payment was due, is attempting to restructure $322 million in long-term debt and revolving credit in addition to $204 million in outstanding obligations.
Teller blamed the company’s troubles on an aggressive acquisition plan and growing debt coupled with a sluggish domestic sales market.