Faced with declining CD sales, Musicland came up short in the rac...

Play and Suncoast Motion Picture Co. banners, listed assets of $371.5 million and debts of $485.6 million, according to a filing with the U.S. Bankruptcy Court, N.Y.C. Musicland received commitments for up to $75 million in financing from its existing bank group, which will allow it continue operating during the restructuring. Musicland’s largest creditor was Deluxe Media Services, $7.9 million owed, followed by: NBC Universal, $6.8 million; Navarre, $6.6 million; Ventura Distribution, $5.8 million; and ABC One Stop Group, $3.7 million. Further down on the list of the top 30 creditors are Electronic Arts, $2.8 million; Virgin Mobile, $2.27 million; Image Entertainment, $2.25 million; Activision, $2 million; Baker & Taylor, $1.2 million and Ubisoft, $1.18 million. Musicland’s plunge into bankruptcy comes 3 years after Sun Capital Partners purchased the chain from Best Buy with a goal of turning around operations. It spend $10 million revamping the 61-store Media Play chain in 2004, but decided in Dec. to close it (CED Dec 14 p5). It also tested a new prototype in N.M. for its 366 Suncoast stores earlier this year and in Nov., unveiled “Graze,” a new design for the mall-based Sam Goody outlets. Graze was designed for the Sam Goody chain to double as an interactive area within stores or a standalone kiosk in malls. The design featured a lounge- like setting with listening stations and gaming stations. Sun Capital also infused Musicland with additional $27 million in April to fund upgrades to the stores. In the end, however, the new strategies and funding weren’t enough to ward off sales lost to music download services and discount and national CE chains that frequently undercut Musicland’s prices. Best buy bought Musicland for $696 million in 2001, with a goal of bringing its CE format to malls. But it sold the chain to Sun Capital 2 years later for no cash. Musicland said it will emerge from bankruptcy protection with fewer stores, but didn’t disclose how many will close. It has 6,000 employees. Musicland will retain Sam Goody and Suncoast, but may seek to reject some leases, 85% of which apply to mall locations. Musicland has suffered declining sales for years. Revenue plunged 42% from $1.89 billion in 1999 to an estimated $1.1 billion in 2005.