Tower Records emerged from bankruptcy protection with new ownersh...
Tower Records emerged from bankruptcy protection with new ownership that sharply reduces the role of the founding Solomon family in the Sacramento-based chain. After a 40-min. hearing, U.S. Bankruptcy Court Judge Peter Walsh, Wilmington, Del., approved the reorganization plan…
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that transfers majority ownership to a group on insurance companies, pension funds and other investors. In gaining a majority stake in Tower, bondholders forgave $80 million in debt, wrapping up a bankruptcy proceeding that lasted just 35 days. The Solomons are left with 15% ownership and Russell Solomon, who founded the chain in 1960, will remain a consultant to chain as chmn. emeritus. The Solomons didn’t attend the hearing, but Tower CEO Allen Rodriguez told the Sacramento Bee the family was pleased with the outcome: “Sometimes you have to lose something to save something.” Representatives of the 3 biggest bondholders -- American International Group, Barclays Bank and Highland Capital Management -- will get 3 seats on a new board, while Solomon takes the 4th. The board is to meet for the first time Fri. The bondholders cancelled Tower’s debt and took $30 million in new bonds, as well as 85% ownership. Discussions on Tower’s future began last spring when it defaulted on bonds after skipping a $5.2 million payment. Tower has been for sale since last May and bondholders are said to be interested in cashing out. About 90 of Tower’s remaining 93 stores are profitable and the chain will close a few locations, including one in Berkeley, Cal. Tower will still face tough competition from national music chains; though the company has reduced its reliance on music sales, they still account for about 60% of revenue. The chain has increased its focus on DVDs and is a partner in the proposed Internet music service Echo, announced a year ago but yet to launch. Tower, which once operated more than 200 stores, lost a $225 million the past 5 years. It restructured several times in recent years, including closing its stores in international markets and selling off its chain in Japan. It also shut a chain of book stores.