In a filing last week, Diamond listed $82,957,076 in total liabilities as of the bankruptcy filing, up from the $75,699,218 it listed in a filing in February. The secured debt ($31,019,348) and priority claims ($851,192) remained the same; the increase was all in the debt to unsecured creditors, which according to the revision stood at $51,086,437 at the time of filing in January, roughly $7.26 million higher than in the original filing. The increase was likely the result of corrections to the numbers Diamond had at the time of filing; creditors had an opportunity to review and notify of mistakes, and Diamond had more time to generate accurate numbers.
A lot has happened since the filing, much of it opaque at this point, but we know that changes that reduce the amount that will be left for unsecured creditors from the acquisition price have taken place.
Fees and Costs are Mounting. Additional fee requests came in last week for the initial period between the filing in January and the end of February, including $818,124 for restructuring consultants Getzler Henrich and Associates, and $769,085 for Diamond’s law firm Saul Ewing. Those are on top of over $1 million in fees from the unsecured creditors committee’s advisors, and over $1 million in incentive and retention bonuses for Alliance Game Distributors and Daimond Comic Distributors employees (see "Fees Roll In"). Investment bank Raymond James has also applied for payment of a $150,000 fee for its role in the debtor-in-possession financing.
More fees are in the pipe. Raymond James and Diamond lender JP Morgan Chase will receive fees for their roles in the sale of the company, Universal Distribution will receive its break-up fee based on its stalking horse bid, and all of the professionals who billed for February will also bill for March and April and perhaps beyond.
Bank debt is higher. In addition to the $31 million in secured debt at the time of the filing, Diamond has incurred additional debt since the filing, and asked for an increase in its credit limit to $44.7 million in March, which was approved (see "Court Approves Increase"). That increase may have been needed for cash flow issues that do not reduce the amount available to unsecured creditors, but it seems more likely that at least some of that increase will come out of funds available for publisher pay-outs.
The final amount of the purchase price will not be known for some time, although Alliance Entertainment estimated that it would be $85,368,053 at one point (see "Bankruptcy Court Approves Sale"). There may be some other asset sales (e.g., Diamond UK), that will bring in additional revenue. While we hope that the amount available for publisher payouts is as close as possible to 100%, the challenges are there, and we won’t know the final outcome for some time.
Barring delays, the purchase is scheduled to close this Friday, April 25.