S&S Loses Reclamation Bid, Questions AMS Viability

by Jim Milliot, PW Daily -- Publishers Weekly, 1/23/2007

Even as publishers debate the merits of Perseus Books Group's offer to take over PGW's contracts (see story below), larger publishers are maneuvering to protect their interests in the AMS bankruptcy case. Yesterday, Simon & Schuster lost a bid to reclaim about $5 million in inventory when a bankruptcy court judge ruled that the banks that lent AMS money have first claim on the wholesaler's inventory. S&S made its motion in response to a motion by AMS to receive approval for debtor-in-possession financing.

In its objection to yesterday's ruling, S&S's attorneys used strong language about the future prospects of AMS, arguing that actions taken by the banks and AMS "have likely doomed this case to an inevitable liquidation." Specifically, S&S contended that AMS has "refused to propose a reasonable inventory returns program and have taken the unsupportable position that no returns should be credited against pre-petition sales even though the returned books were sold under such invoices." To avoid litigation over this issue, S&S and other major publishers have stopped shipping to AMS on a post-petition basis, S&S said, and if that doesn't change "it is unlikely AMS has any reasonable chance of successfully reorganizing."

The only large publisher that would confirm shipping books on a COD basis is Penguin, and a source there said he wasn't sure how long that would continue, because "I'm not sure how long AMS can survive" without receiving new titles from other major publishers.

A number of issues surrounding the entire AMS case will be heard tomorrow at a hearing set for 10 a.m. On Jan. 31, a hearing will be held on AMS's proposal to establish procedures to sell all or part of the company or to find new financing.