Alliance Entertainment, the indie music distributor in bankruptcy proceedings, has withdrawn the planned sale of its Red Ant Records after unsecured creditors objected to the price. The move sets the stage for Red Ant to file for bankruptcy protection.
Alliance announced last week that it would sell Red Ant for $625,000 to venture capital firm Wasserstein Perella and retain 10%, subject to court approval and no competing offers from other bidders (Daily Variety, Aug. 7).
At a bankruptcy court hearing Wednesday to consider the deal, a committee of 11 unsecured creditors determined the price was too low.
Alliance in Chapter 11
Alliance and 14 of its subsidiaries filed for Chapter 11 bankruptcy protection from creditors July 14, just one day before its was required to make a sizable loan payment.
Red Ant, founded last year by former MCA Music Entertainment Group chairman and CEO Al Teller with a reported $20 million backing from Wasserstein Perella, was not included in the bankruptcy filing.
U.S. District Court documents show the unsecured creditors include United Parcel Service, Bankers Trust New York Corp., TDK Corp. and the Harry Fox Agency, which licenses music.
At the hearing, Alliance said an offer of $2.2 million for Red Ant was submitted by Bust-It Records, an independent label formed by rapper MC Hammer.
But the offer was not considered because Bust-It could not show it “had the financial wherewithal to complete such a transaction,” the company said.
‘Expedited’ Chapter 11
Alliance said Red Ant would have to seek Chapter 11 bankruptcy protection “on an expedited basis” unless it receives “an acceptable offer.”
After founding Red Ant, Teller incorporated it into Alliance through a series of transactions after becoming chairman of the New York-based independent music distribution outfit.
Teller resigned as chairman of Red Ant shortly after Alliance’s bankruptcy filling.