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Wherehouse Files for Chapter 11

January 22, 2003|Jeff Leeds | Times Staff Writer

Music retailer Wherehouse Entertainment Inc. filed for Chapter 11 bankruptcy protection Tuesday, saying it was unable to compete in the face of price wars and online piracy.

Record executives say the filing could be the first of several music-related bankruptcy filings after last year's 11% slide in album sales.

The bankruptcy filing is the second in Wherehouse's 30-year history. The company previously filed for protection in 1995 and emerged two years later.

The Torrance-based retailer on Tuesday said that it plans to close 120 unprofitable or underperforming stores in the months ahead.

That follows the closure of roughly 30 stores after a disappointing holiday shopping season.

Wherehouse officials said they would redesign the chain's remaining 250 stores, adding interactive kiosks and other features to draw customers.

With the new initiatives, "we are confident Wherehouse will emerge from this process as a stronger, leaner, more efficient operation," President and Chief Executive Jerry Comstock said.

Under Chapter 11, a company is protected from creditors while it works out a plan to pay debts and reorganize.

In its latest filing, Wherehouse listed assets of $228 million and liabilities of $222.5 million.

Company officials said the five major record conglomerates are collectively owed about $50 million and are designated as secured creditors, placing them ahead of others in the line to collect.

Comstock said Wherehouse had been suffering from not only online piracy but also competition from mass merchants that sell CDs below cost to draw customers who may buy big-ticket electronics.

The filing, Comstock said, is the most effective way to "position Wherehouse to compete effectively in the new music industry."

Earlier this month, Best Buy Co. said it planned to lay off 700 workers and close 107 stores in its Musicland unit. Several other music chains also have announced store closings.

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(BEGIN TEXT OF INFOBOX)

Multiple-bankruptcy filers

With Wherehouse filing for bankruptcy protection a second time, here is a look at other multiple filings:

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Company name: Braniff International

First filing: 5/13/82

Second filing: 9/28/89

Additional filing: 8/7/91

Outcome: Closed in 1992

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Company name: Continental Airlines

First filing: 9/24/83

Second filing: 12/3/90

Outcome: Emerged from bankruptcy in April 1993

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Company name: Salant

First filing: 2/22/85

Second filing: 6/27/90

Additional filing: 12/29/98

Outcome: Emerged in May 1999

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Company name: Resorts International

First filing: 12/22/89

Second filing: 3/21/94

Outcome: Emerged in April 1994

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Company name: Ames Department Stores

First filing: 4/25/90

Second filing: 8/20/01

Outcome: Liquidated in fall 2002

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Company name: Greyhound Lines

First filing: 6/4/90

Second filing: 11/2/94

Outcome: Sold, new parent under bankruptcy protection

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Company name: Best Products

First filing: 1/4/91

Second filing: 9/24/96

Outcome: Liquidated in late 1996

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Company name: Trans World Airlines

First filing: 1/31/92

Second filing: 6/30/95

Additional filing: 1/10/01

Outcome: Bought by American Airlines for $742 million

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Company name: LTV

First filing: 2/14/92

Second filing: 12/29/00

Outcome: Liquidation almost complete

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Company name: Schwinn/GT

First filing: 10/8/92

Second filing: 7/16/01

Outcome: Divisions sold

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Company name: Grand Union

First filing: 4/19/95

Second filing: 6/24/98

Additional filing: 10/3/00

Outcome: Liquidated in 2001

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Company name: Bradlees

First filing: 6/23/95

Second filing: 12/26/00

Outcome: Liquidated in 2001

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Company name: Smith Corona

First filing: 7/5/95

Second filing: 5/23/00

Outcome: Sold to Pubco in April 2001

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Company name: Discovery Zone

First filing: 3/25/96

Second filing: 4/20/99

Outcome: Liquidated

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Company name: Montgomery Ward

First filing: 7/7/97

Second filing: 12/28/00

Outcome: Liquidated in early 2001

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Company name: Planet Hollywood

First filing: 10/12/99

Second filing: 10/19/01

Outcome: Set to emerge this quarter

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Source: Times research

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