Musicland $15.7 million partial secured debt repayment approved

By Caroline Salls

Pittsburgh, Dec. 28 - Musicland Holding Corp. obtained court approval to make a $15.7 million partial principal repayment on its secured trade debt, according to a Thursday filing with the U.S. Bankruptcy Court for the Southern District of New York.

On Aug. 10, the company made a $26 million debt repayment.

The company said it wants to make the second partial repayment in light of the continuance of the confirmation hearing for its plan of liquidation to Jan. 18.

According to the motion, the secured creditors could arguably attempt to foreclose on all or substantially all of their assets, but by agreeing to the partial repayment, the creditors are allowing Musicland to use its remaining cash to pursue an orderly liquidation of its Chapter 11 case.

The company said any inability to make the payment could result in the secured trade vendors withdrawing their support of the plan and asking the court to convert the bankruptcy case to Chapter 7.

In addition, the court extended the deadline for plan confirmation to Jan. 31 and the deadline for occurrence of the plan effective date to Feb. 28.

Musicland, a Minnetonka, Minn., specialty retailer of pre-recorded entertainment software products, filed for bankruptcy on Jan. 12, 2006. Its Chapter 11 case number is 06-10064.

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