Approval of Liquidation Plan Marks End for AMS

With the approval of the final liquidation plan on December 4, the nearly yearlong AMS bankruptcy proceeding has entered its final phase. The approval of the plan sets in place how much money the creditors will be paid as well as procedures for reconciling new objections and dealing with any litigation issues that may arise. While the latter issues could take many months to finally resolve, the plan approval signals that all operational issues regarding AMS have been settled.

In a November hearing discussing the liquidation plan, presiding Judge Christopher Sontchi commended all parties in the process for moving from what he described as a “free-fall fire sale situation” in January to “an orderly sale and liquidation of the assets and a confirmed plan.” That doesn't mean all parties came out unscathed. In addition to dozens of employees losing their jobs, AMS shareholders will receive no money and AMS creditors will receive 27% to 42% of what they were owed in their pre-petition claims. PGW creditors, however, are being paid 100 cents on the dollar on their claims. That applies only to creditors who did not sign consent agreements to have their distribution contracts assumed by another distributor; those publishers received all the money they were entitled to at the time of making the new deal—75 cents on the dollar from Perseus, 100 cents from NBN. One reason the PGW creditors were paid in full is that before the bankruptcy filing, PGW was having the best year in its history, putting it in a better financial position to pay back its creditors than AMS's wholesaling operation. In addition, with most of PGW's clients opting for new distribution deals, their claims were removed from the bankruptcy debt.

One PGW client holdout was Goofy Foot Press, which received $48,256, the full amount of its pre-petition claim. Goofy Foot founder Paul Joannides said the resolution of the bankruptcy was “a lot better for us than 99% of the people with a company that declared bankruptcy. It's a rare day when you get 100 cents on the dollar.” Still, Joannides lamented that PGW and its clients had to be put through the bankruptcy wringer: “Why did this have to happen—the destruction of what was then the world's finest home for publishers, and a whole year we'll never get back?”

A significant amount of the proceeds to pay creditors came from the sale of the bulk of AMS's wholesale operations to Baker & Taylor for approximately $72 million. Among the other ways money was raised was through Perseus's $80,000 purchase of the PGW name and lease obligations, the sale of PGW's international divisions and a fall sale of inventory left in the old AMS warehouse.

The bankruptcy loosened AMS's grip on what at one point had been a near monopoly on supplying books to the warehouse clubs. Competitors had been chipping away at AMS's position ever since the company's financial reporting was called into question in 2004, and the bankruptcy accelerated that process. While Baker & Taylor continues to have the lion's share of AMS's former business through its newly formed Baker & Taylor Marketing Services, Levy Home Entertainment—with a San Diego division staffed by a number of former AMS employees, including Adam Zoldan—now serves BJ's Wholesale. Beginning February 1, Anderson Merchandisers will serve all of the book department at Sam's Club. Anderson had been supplying about 134 Sam's on a test basis. Costco is being supplied by BTMS, as well as by Ingram, Benjamin News, American West and other smaller wholesalers.

To monitor future events, former AMS CFO Curt Smith, who has been supervising the wind down of AMS as CEO, has been named plan administrator. He will be overseeing what the bankruptcy court is calling the Reorganized AMS, which comprises Publishers Group Inc. and Publishers Group West, which have been merged into AMS. The old AMS has been dissolved and the new AMS “shall remain in existence for the purpose of liquidating and winding up the Estates,” according to the terms of the liquidation plan. Overseeing Smith will be a reconstituted creditors committee, now known as the post-confirmation committee, comprising Random House, Hachette Books Group, Penguin, HarperCollins and Workman. According to the liquidation plan, the committee's duties include “maximiz[ing] distributions to Holders of Claims.” The committee will be dissolved “upon the later to occur: the entry of the Final Decree; the dissolution of Reorganized AMS; the payment of the final distributions to Creditors holding Unsecured Claims against AMS.”