Parent Company of Stereophile & Home Theater Mag Files Chapter 11

[chrisy]

Today's Top Story:

Parent Company of Stereophile & Home Theater Mag Files Chapter 11

In a surprising move this morning, Source Interlink, a multi-billion dollar publishing company owned in part by Ron Burkle, filed for Chapter 11 bankruptcy. Source Interlink only a few years ago acquired the "enthusiast" group of magazines from PRIMEDIA which included AV books such as Stereophile, Home Theater, Shutterbug and many others. The deal was north of a billion dollars and came before the current economic woes that have seen all but online and TV ad revenues significantly contract.

Citibank, according the New York Post, will own upwards of 80 percent of the company's stock which is priced at about 15 cents per share on Tuesday morning.

The Source Interlink Chapter 11 comes at a tough time for co-competitor Sound & Vision magazine which is owned by French publisher Hachette Filipacchi. Sound & Vision is packaged for sale along with some popular photo books, but has yet to announce a buyer. One would assume many of the enthusiast titles at Source Interlink could also go on the market via a judge's gavel.

Stereophile is an institution with audiophiles, easily taking the crown for being the most historically significant magazine in the history of high end audio. Home Theater Magazine is also a powerful magazine with solid advertisers and top notch content in the printed world. Both publications have very strong, highly ranked websites to pair with the print magazines.

While its doubtful that Stereophile and Home Theater will just go away, some of the associated costs, additional web sites and many of the writers on staff could become victim of today's brutal economy.

Source: HomeTheaterReview.com

[billleebens]

Hi, chrisy!

Keep in mind that this is a Chapter 11--reorganization-- not Chapter 7, or liquidation.

It's unlikely that any assets would be sold off while in an 11. Normally, a business gets thrown from an 11 to a 7 on the insistence of the Federal Bankruptcy Trustee when it becomes obvious that the business has no chance of recovery, and liquidation of assets is the best route for creditors. If some of the debt load is thrown out--which is possible and indeed likely in this case--Source may be viewed as potentially viable. If that occurs, the company would be followed by the trustee for quite a while.

Having just spent a year shepherding a business through an 11 in Federal Bankruptcy Court, I've become familiar with the path these things take. Even if Source did go into a 7, it might well take a year to reach the stage where assets were sold off.

Cheers, Bill

[Ray in Kingwood]

sad

[Kal Rubinson]

Ray in Kingwood wrote:

sad

Not terribly. The company has emerged from bankruptcy stronger than when it entered and the outcome was predetermined.

From JA:

The reorganization of the parent company's debts and assets was done _before_ the Chapter 11 filing. The hearing is set for May 28; after that date, the banks holding the debt will take over ownership and Source Interlink will become a privately held corporation. The reason the banks will exchange debt for ownership, rather than foreclosing on the debt, is that Source's magazines like Stereophile are efficiently run, are the market leaders in their sectors, and return a healthy profit on investment, even in these recessionary times.

[Ray in Kingwood]

well thats good.