Move should help Netco skirt Chapter 7 bankruptcy liquidation
NEW YORK — Battered file-swapping pioneer Napster has signed a nonbinding letter of intent to sell substantially all of its assets to an as-yet-unnamed party in a move that should help the Netco skirt a Chapter 7 bankruptcy liquidation.
Creditors’ attorney Rick Antonoff said the letter resulted from one of several bids that Napster has received as part of its Chapter 11 proceeding, with offers hovering “on both sides of the $10 million mark.” Creditors are seeking an equity stake in whatever entity acquires the assets, plus debtor-in-possession financing of at least $200,000 to keep Napster running while the paperwork goes through.
Antonoff said Napster and its creditors had been actively soliciting bids since early September, when U.S. Bankruptcy Court Chief Judge Peter J. Walsh denied an offer by Bertelsmann to buy the assets for around $9 million plus the elimination of $90 million in debts owed to the German media giant.
Walsh said no to the deal amid worries that Napster’s chief exec Konrad Hilbers — a former Bertelsmann exec — was too cozy with his erstwhile employer during what was supposed to have been an open auction for Napster’s assets.
Hilbers left the company shortly after the sale was nixed. Antonoff said he’s optimistic that the company will be able to get a Chapter 11 trustee to navigate the company through the final sale procedure. Bertelsmann made several investments in Napster over the past year in a fruitless effort to help the company develop a legal, subscription-based version of its wildly popular free service.
Earlier this month, adult entertainment firm Private Media Group offered stock worth $2.4 million for Napster’s trademark rights, but Antonoff dismissed that offer Friday as “not competitive.”