The letter below was sent by LPC CEO David Wilk to LPC's client publishers on Tuesday, April 2nd, to inform them of LPC's Chapter 11 filing. For the story of the filing, see 'LPC Files Chapter 11.' For LPC's clients' reactions, see 'Publishers React to LPC Bankruptcy.'
Dear LPC Publishers -
For the past three months, LPC has been negotiating with our bank, American National Bank, to effect a financial restructuring of the agreement on how to go forward. The bank assured us that only the documenting of the agreement remained.
On Thursday, CDS wired to our account its payment for December sales, less returns and fees, and we in turn prepared wiring you and other publishers. That money is in great part, the payment for receivables that belong to the publishers. The bank, however, in spite of their explicit promises, seized that payment and all other funds in our account. As a result, LPC had no recourse but to file for Chapter 11 Bankruptcy protection, which we have done today, April 2, 2002.
As you may know, Chapter 11 Bankruptcy affords protection for the Company and permits it to continue operating while it seeks to reorganize its finances. We are continuing to ship books through
CDS, and it is important for you to know that all sales generated after our Bankruptcy petition is filed are protected against claims of any creditors; thus you can be assured of receiving payment due to you for those sales. LPC is operating on a cash positive basis in the present, and we are confident that we will acquire immediate Debtor in Possession financing to meet current obligations.
I realize this situation will be a horrible blow for you and many others. It certainly is for me, and everyone else who works at LPC. While we cannot pay you now for current amounts due from prior sales - because we do not have the cash which the bank seized (wrongfully in our opinion) - the fact that we have filed for Chapter 11 protection does not mean that you will not be paid in full for your pre-petition sales (less returns of course), as we, and various well regarded legal experts with whom we have consulted, believe the law clearly protects your proceeds from consignment sales. You can and should continue to do business with us as usual at this time.
Because we are well aware that time is of the essence for our client publishers, we are making every effort to insure a speedy resolution to all outstanding issues.
I anticipate sending out an update on where we stand very soon.
I also intend to call each of you to try to provide you with a further explanation of the situation. Please call for any additional information. We will try to respond promptly but please understand that there may be a delay in my returning your call because of the various bureaucratic burdens imposed upon a Debtor in Possession in Chapter 11.