Source Interlink Files Pre-Packaged Bankruptcy

By Judith Rosen -- Publishers Weekly, 4/28/2009 8:16:00 AM

After trying to right itself financially at the start of the year by charging more for distributing magazines, then suing competitors and magazine publishers with collusion in U.S. District Court in the Southern District of New York when the increase was rejected, Source Interlink is trying a different tack. This morning, it filed Chapter 11 bankruptcy protection in U.S. Bankruptcy Court in Delaware as part of a pre-packaged bankruptcy plan. According to Source, the bankruptcy is part of an agreement with lenders to eliminate $1 billion dollars of existing debt and to privatize the company. And Source said it expects to come out of the prepackaged bankruptcy in 35 days. 

Some may wonder if that’s possible given the level of debt reported in the Bonita Springs, Fl.-based company’s Chapter 11 filing, which owes more than $1 billion and has assets of between $500 million and $1 billion. Leading off the list of the top 30 creditors are: HSBC Bank, which is owed $455 million; Time Warner Retail, $75.5 million; and Comag Marketing Group, $53.2 million. Levy Home Entertainment, which handles book distribution for Source, is out over $14 million. Source said it will pay all creditors in full if they agree to maintain current credit and payment terms.