Tower Records objects to exclusivity termination, cites lack of support for a creditors committee plan

By Caroline Salls

Pittsburgh, June 4 - Tower Records objected to the official committee of unsecured creditors' request to terminate the company's exclusive right to file a plan of liquidation and solicit votes on the plan, according to a Monday filing with the U.S. Bankruptcy Court for the District of Delaware.

According to the objection, the official committee of unsecured creditors wants the court to terminate the exclusivity period and allow it to file its own plan of liquidation.

Tower Records said on the eve of the hearing for approval of its disclosure statement, "the creditors committee could not have made its declaration of war more clear" when it filed the motion to terminate exclusivity and also sought approval to conduct examinations of the company's board of directors, officers, financial advisers and investment bankers.

The company said these moves were all in response to the news that Tower Records' informal committee of secured trade vendors supported the company's proposed plan of liquidation.

Tower said that in response to the creditors committee motions, the trade vendors said they would prefer to see the case converted to Chapter 7 bankruptcy over a competing plan process, and, if exclusivity is terminated, the trade vendors plan to begin immediate litigation over the issue of the company's administrative solvency.

Tower said the "dueling plan" process would not work because the company would incur expenses it cannot afford, as attorneys for several parties would be billing the company for services related to two separate plans.

In addition, the company said a plan proposed by the creditors committee would not be confirmable because the members of the trade vendors committee, as well as the unsecured creditors who sit on the company's board of directors, have all already said they will not vote for a plan that gives the creditors committee control of the post-bankruptcy estate.

Tower said the creditors committee will be able to object to the company's proposed plan, and the court said the committee can include a letter in the plan vote solicitation materials outlining the objections for voting creditors.

Tower is a subsidiary of Sacramento, Calif.-based MTS Inc. The company filed for bankruptcy on Aug. 20, 2006. Its Chapter 11 case number is 06-10886.

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