Alliance Entertainment, the Al Teller-run independent music distribution outfit, announced Tuesday that it was in default under its credit agreement because it failed to make a required amortization payment of $2 million.
The company, which has been scrambling to avoid a bankruptcy protection filing, has for months been searching for an investor willing to put $50 million into company coffers.
Run by former CEO of MCA Music Entertainment Group Teller, the company had designs on becoming a seventh major. It has also failed to satisfy a requirement that it raise $35 million of equity prior to July 1.
According to sources, Alliance has been in negotiations since early this year with several investors that would have provided a cash influx to the company.
Alliance’s main backer, investment bankers Wasserstein-Perella, have increased their stake in the company, but are unwilling to provide additional capital.
Alliance is in the process of getting waivers from its banks and major suppliers, such as the big six record distribs, which recently put the company’s credit on hold, according to sources.
The firm also announced that it was unlikely it would be permitted by its banks to make an interest payment due and payable July 15 on its $125 million of 11.25% senior subordinated debentures.
Alliance has approximately $190 million in outstanding debt.