Late today, Judge Christopher Sontchi approved Perseus‘s offer to take over the distribution contracts of all PGW publishing clients that have signed distribution agreements with the company, reports PW Daily. It ends a highly competitive contest between Perseus and the National Book Network for the fate and fortunes PGW clients. “We are excited to move forward as quickly as possible to write checks to PGW clients and to provide some certainty for PGW employees,” said Perseus CEO David Steinberger in a statement. More than 100 publishers, who collectively constitute about 85% of the total amount of monies owed to PGW clients in the AMS bankruptcy, have signed agreements with Perseus. NBN president Jed Lyons said he was “very disappointed” to not have the opportunity to work with the PGW publishers, but congratulated Perseus on its victory.
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It took a flurry of late night activity, and Judge Christopher Sontchi could decide to do whatever he likes when today’s hearing gets underway at 11:30 PST, but for now, it looks like Perseus has the upper hand in the battle for Publishers Group West and its client publishers. PW Daily reports that AMS lawyers and the unsecured creditors’ committee gave their support to Perseus’s offer to pay 70 cents of pre-bankruptcy claims to PGW clients. Perseus has signed contracts with publishers accounting for 85% of the PGW debt. Perseus CEO David Steinberger said he was “gratified” for the backing of the two parties and appreciated the support Perseus received from the publishers.
But National Book Network isn’t counting themselves out yet. CEO Jed Lyons announced the company is raising the payout to publishers to 100% of monies owed and dropping NBN’s $1.2 million claim against AMS, as well as another unsecured claim. NBN has agreements with 118 publishers, representing 42% of PGW clients, excluding Avalon, which is being acquired by Perseus.
And the 11:30 hearing will also address distributor Baker & Taylor ‘s plans to take control of the non-PGW-related bankruptcy holdings of AMS. Michael Cader noted in Publishers Lunch yesterday that “doing some reverse math” revealed some interesting findings. “In their January 24 court filing, [AMS] declared accounts receivable of $147.5 million and inventory of $72.5 million. But in the B&T letter of intent, accounts receivable have plunged to $65 million — implying that accounts have paid down their payables by returning up to $82 million worth of books.” That’s a whole lot of money unaccounted for, and it’s not even taking into account how much money Wells Fargo has first claim on. Radio Free PGW has much more on B&T’s offer and why, in his opinion, it’s the “recipe to make stinkbug pie.”
A flurry of stories preview tomorrow’s big auction day where Judge Christopher Sontchi will decide who has the better offer for Publishers Group West: Perseus or National Book Network. PW Daily reports, as does Publishers Marketplace, that NBN President Jed Lyons promised in a letter sent to publishers yesterday that if his bid for PGW contracts prevails, he would enter into a lease with the current landlord for the current AMS/PGW warehouse in Indianapolis rather than relocating the stock to the NBN warehouse. NBN will also keep a Bay Area presence and maintain a New York office and perhaps most importantly, keep the PGW name and logo.
Some of the PGW staff members took exception to the use of their names in the NBN letter, concerned that it represented an endorsement of the NBN offer, according to Avalon president and PGW founder Charlie Winton, but Lyons said the letter was meant to show NBN’s commitment to PGW, and not as an endorsement.
PW Daily reports that today’s 11 o’clock hearing in U.S. Bankruptcy Court in Delaware on the sale of Publishers Group West ended in a postponement until later this week. Judge Christopher Sontchi clarified for publishers that they are entitled to sign agreements with both National Book Network and Perseus. He also granted NBN two more days to produce a definitive agreement, at which point an auction will be held to determine the winner. If they can’t, then Perseus’s offer will be approved on Thursday morning.
“We respect the process and we’re just looking forward to moving forward as quickly as possible,” Perseus CEO David Steinberger told PW Daily. “We’ve always said it’s important for the PGW community to get a decision quickly.” For his part, NBN head Jed Lyons was pleased that the judge had given the company the needed time to complete its documentation. He noted that the judge said that “facially” NBN’s offer appeared to be higher and better.
In other news, the so-called “mystery buyer” for Advanced Marketing Service’s holdings is none other than book distributor Baker & Taylor . The two parties must complete an asset purchase agreement and then file a motion with the bankruptcy court for a hearing to determine if there are other suitors interested in bidding on the company. The parties expect to request a bidding procedures hearing before the bankruptcy court on February 16, and would hope to close a deal by March 15.
Yesterday’s news of the National Book Network‘s offer to Publishers Group West clients who have been imperiled by the Advanced Marketing Services Chapter 11 filing has, understandably, thrown quite the monkey wrench in what seemed to be an orderly (if steamrolled) handoff of client contracts to Perseus. Since sending that letter, NBN president Jed Lyons told Shelf Awareness that “we’ve been inundated with publishers. We’re furiously taking calls and making calls.” He called the offer “pretty straightforward” and thought it would be more attractive to most publishers than the offer made by Perseus. And PGW President Rich Freese – a former NBN employee – commented in a memo to publishers that “I know that NBN appreciates PGW’s close relationship with our customers and will undoubtedly maintain the high level of service and reliability that you have come to expect from PGW.”
So what’s the problem? According to Radio Free PGW – a publisher who is decidedly in NBN’s corner – PGW sent a plea to its publishers to ignore “a clearly superior offer from NBN” on the basis that time is, essentially, running out. “Given the limited time we have available, we believe that it is imperative that our publishers support the Perseus transaction and execute the Perseus agreement so as to eliminate any uncertainty as to the company’s ability to consummate a transaction,” reads yesterday’s communique. But since Perseus’s offer is merely that – an offer, and one that still hasn’t reached its 65% of publishers threshhold – a PGW publisher is very much free to consider, and accept, NBN’s terms. Especially if the February 12 court hearing is postponed, as per Rich Publishing’s recent motion.
Meanwhile, the San Diego Union Tribune reports that AMS is asking a bankruptcy court to let it pay retention bonuses of approximately $750,850 to 117 PGW employees, the money which would be paid out by potential buyer Perseus. A hearing on the request is scheduled for Feb. 28 in the U.S. Bankruptcy Court in Wilmington, Delaware.