Sunday, February 11, 2007

Day before decision day

Ok, I woke up this morning at 6 AM and starting thinking about job hunting, Putin's comments on US foreign policy, and what is going to happen to Advanced Marketing Services (AMS) and Publishers Group West (PGW) tomorrow.

For AMS & PGW, tomorrow may be a historic day. At this point it is best to consider the options for both companies separately. I'll do the hard one first.


1) Judge Sontchi could simply delay making any rulings. He could consider the NBN offer for PGW too recent to make a decision. This would depend on how many publishers have signed the NBN letter.
2) He could agree to the NBN buyout. Again depends on the number of signers.
3) He could agree to the Perseus buyout. Ditto.
4) He could throw PGW into chapter 7. This is extremely unlikely with 2 companies putting forward offers.

As part of the PGW resolution, one thing he could also do would be to order that PGW's inventory be physically separated out from AMS' in the Indy DC. Now the huge hitch in this would be be the secured loan agreement. I am not a lawyer, but my reading of it leads me to believe that both AMS' and PGW's inventory is being used to secure the loan. Remember, this is "Senior" loan, so the lender is first in line for all assets. At least there are parties actively interested in taking over PGW. Not so much (so far) with AMS.


1) Someone could step up tomorrow and formally put an offer in for AMS. My feeling is this would be the VERY last day to do this.
2) Judge Sontchi could throw AMS into chapter 7.
3) He could throw AMS into chapter 7 pending resolution of the PGW sale.
4) He could simply delay a decision to throw AMS into chapter 7 until PGW's assets (its inventory) is physically separated out from the Indy DC.

Obviously I am not hopeful for AMS. The reasons for this are pretty simple. I have not seen one document in the various filings that state, here is how we can make AMS start making money. Remember, AMS' March 20th '06 press release was very coy about it, but they stated they lost money operationally (before legal and accounting costs) of about 1% on net sales in FY '05 and would lose between .5% and .8% in FY '06. In other words, they are not making money shipping books. This, more than any other reason, is why the creditors are pushing for liquidation. They recognize that AMS has no visible means to dig itself out of the hole it is in.

Ok, I'm off to the gym. I'll pontificate on the rest of my laundry list later.


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