News
Diamond Comics Files for 'Liquidation' Bankruptcy
posted on by Anita Tai
Media news website ICv2 reported on Sunday that Diamond Comic Distributors filed a new motion on Friday to change from the previously filed Chapter 11 bankruptcy to Chapter 7. This change requires the company to liquidate assets to repay debtors, as opposed to reorganizing its debts, which may allow businesses to return to operation.
If the change happens, the court would appoint a trustee to liquidate assets and distribute revenue. In addition, Diamond or its consultants would no longer manage the bankruptcy.
The company's US$2.5 million loan agreement with JPMorgan Chase Bank N.A. expired on November 14, but the bank will allow a brief extension for the transition between chapters.
Diamond's assets include consignment inventory, claims and causes of action; which consist of payments due from purchases of the company's other operations, among other assets listed.
Chapter 11 Bankruptcy Claim
Diamond is one of the primary distributors of print comics in the United States, particularly to the "direct market" of comic specialty stores. Diamond Select Toys produces toys based on several brands including Godzilla, Mighty Morphin Power Rangers, and Transformers.
Diamond announced on January 14 that it has filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court in the District of Maryland. Companies who file under Chapter 11 are able to maintain business assets, which may or may not include licenses, in order to attempt to reorganize. The business can continue operating as it reorganizes its debts under court-supervision and potentially resume operation as a healthy business. This is opposed to a Chapter 7 bankruptcy, in which a business shutters its doors and ends operations. A trustee had requested on April 28 that Diamond move from Chapter 11 to Chapter 7 because it had not filled out necessary monthly reports, but Diamond eventually agreed to fill the reports. Diamond cited that the decreased consumer activity, rising operating costs, and declining sales in the comic book industry post-COVID-19 led to its decision.
Background
Alliance Entertainment had announced on March 25 that it won the bid to acquire Diamond Comics Distributors' assets. Then, a few days prior to a court date of April 7 to approve the sale to Alliance, the owners of Diamond Comics Distributors made an attempt to change the sale of ownership to a smaller joint bid by Universal Distribution and Ad Populum. Alliance in response filed a lawsuit on the same day to block the change in sale.
After this attempted legal battle over the new ownership, the Bankruptcy Court for the District of Maryland approved the sale to Alliance on April 11. Alliance dropped the lawsuit against Diamond Comics as a result. The final date for the closing of the sale was slated for April 25, before the turn of events with Alliance terminating the sale agreement.
However, Alliance Entertainment announced on April 24 through a U.S. Securities and Exchange Commission (SEC) notice that it had terminated the agreement to purchase "substantially all" of Diamond Comics Distributors' assets. The company then filed another lawsuit against Diamond later that week claiming that the debtor did not timely indicate that its largest vendor Wizards of the Coast had not renewed its expiring agreement with Diamond. The lawsuit asserted that this fraudulent misrepresentation was part of a "scheme" to lead Alliance to purchase the assets for much more than its value. Wizards of the Coast's agreement with Diamond expired on April 30. Diamond had informed Alliiance on April 17, but allegedly knew of this since December 2024.
Maryland's United States Bankruptcy Court Courts approved the combined bid by Canadian comics distributor Universal Distribution and pop culture manufacturer and licensor Ad Populum to acquire Diamond's assets on April 20. Universal will acquire the assets of Alliance Game Distributors. Meanwhile, Ad Populum will acquire the assets of Diamond Comic Distributors, Diamond Book Distributors, Diamond Select Toys & Collectibles, Collectible Grading Authority, and other assets. The sale process does not affect Diamond UK.
The sale was completed on May 16. Chris Powell, Diamond's Chief Sales & Service Officer, also left the company at the time. The comics blog The Beat has reported that there were other layoffs at the company, but ANN cannot corroborate this information.
Alliance Entertainment had planned to purchase Alliance Game Distributors for US$36,865,000, less US$6,770,735, as well as an amount to be paid directly to Alliance Game Distributors' creditors. Contracts from creditors were to be assigned include Arcane Tinmen, Bandai, Dire Wolf Digital, and Wizards of the Coast, among others. Other assets were to be sold at US$21 million, similarly less amounts to be paid to creditors whose contracts were to be assigned and incentive based on inventory to be sold by the end of the year. Assigned contracts include Viz Media, LLC; Spin Master; and Comic-Con; among others.
Alliance Entertainment is a global distributor of physical media (including home video, games, and music) and merchandise. One of its subsidiaries, Distribution Solutions, began handling distribution of Blu-ray Disc and home entertainment products from Sentai Filmworks and Section 23 in April 2023, after Crunchyroll acquired anime and otaku media retail site Right Stuf in August 2022.
Source: ICv2 (Milton Griepp)
