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Posts Tagged ‘Publishers Group West’

Today in AMS: More on NBN Offer and PGW’s Options

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.

Today in AMS: NBN Makes Offer for PGW Publishers

If you were a Publishers Group West publisher about to enter into an agreement with Perseus for 70 percent on the dollar to take over your holdings, there’s a new offer on the table. The independent distributor National Book Network (NBN) sent a memo yesterday to PGW publishers explaining their terms, which include payment of 85 cents on the dollar for claims against the bankrupt estate, a contract extension of three years, and a continuation of the existing PGW contract with the following modifications:

- no free freight so you will not be asked to help pay for it.
- a credit for returns the same month in which returns are processed by NBN.
- no contribution to the cost of co-op.
- clients pay a small fee for pages in the NBN seasonal sales catalogs.

Radio Free PGW is “very impressed with NBN and decided days ago that NBN would be our new home,” so they view today’s offer as “very rewarding.”

Today in AMS: PGW Clients Get Perseus Offers

PW Daily reports that various Publishers Group West clients are sending back signed agreements to the distributor, though as of this writing, not all publishers have yet received offers. Perseus CEO David Steinberger said he had received “more than 10″ contracts since they began coming in yesterday. Late last week, Steinberger and PGW head Rich Freese met with a group of PGW clients in the San Francisco Bay Area. “The sessions went well. We did a lot of listening,” Steinberger said.

As the runup to the February 7 bankruptcy court hearing date for objections to Perseus’s offer continues, so too do the rumors and speculation. Yesterday PW Daily reported that AMS’s primary lender, Wells Fargo Foothill, “received at least two promising going concern offers for the AMS business,” though the bidders were not named. And both Edward Champion and Radio Free PGW offer items about dealings within Perseus’s distribution chambers.

Today in AMS: the NoCal perspective, AMS’s side of the liquidation story

The SF Chronicle finally picks up on the AMS bankruptcy story as Ilana DaBare probes the Northern California angle. That’s because many of Publishers Group West‘s clients – like McSweeney’s, Amber-Allen and New World Library – set up shot in and around the Bay area, and are still very much reeling from every development stemming from a bankruptcy that occurred at the “worst possible time.” Take tiny Parallax Press, a nonprofit Buddhist publisher in Berkeley with six employees, was owed $150,000 of its total annual sales of $850,000. “Revenues from the three most lucrative sales months of the year are not available to us,” said Travis Masch, Parallax’s publisher. “This has a tremendous financial impact on us.”

Meanwhile, the San Diego Union Tribune has much more about the liquidation petition by AMS creditors. And not surprisingly, AMS isn’t happy with the idea at all – as the company’s attorney, Russ Silberglied, accused the creditors of exacerbating the company’s problems by cutting off book shipments and making the warehouse stores deal with rival distribution companies. “(The creditors), together with our competitors, are talking to our customers and trying to circumvent us,” Silberglied said. “It seems like the very definition of the harm that’s going to befall us. That’s our business. You know, if we can’t perform, if we can’t sell books, we can’t perform our business.”

And Bud Leedom, who publishes the San Diego Stock Report, said it’s possible AMS still has a shot at surviving its current difficulties. “I’d like to think there’s more to the company than liquidation,” said Leedom. “On the other hand, AMS’s business is all about relationships and the strength of its customers. Those relationships may be untenable because the customers can’t get information about the strength of the company.”

Today in AMS: More on Perseus’s ‘White Knight’ Status

If our coverage of the AMS bankruptcy of late borders on the skeptical, it may be because we can’t help but be reminded of one scenario in particular: if Perseus does indeed end up the sole distributor of all 150-odd clients of the entity now called Publishers Group West, then Perseus would become the distributor for nearly 300 publishers. “Independent distribution is a tremendously competitive field, with many well-funded conglomerates,” David Steinberger, the company’s CEO, told the Associated Press yesterday. “Our mission is to be the preferred platform.”

Preferred is one thing, but at what price? And is being the only distribution game in town for hundreds of independent publishers a good way to do business, or will the anti-trust dogs have to be called in? Then again, let’s also remember that any deal, no matter how enticing it may seem on the surface, still has to be approved by the Delaware bankruptcy court overseeing the AMS case. And if Christopher Sontchi decides not to give his okay, then it’s back to square one for a great many publishers. Point being, no matter what happens, the news will never be entirely good – it’s really a choice between the lesser of several unsatisfactory options.

But until the deal is approved – or not – we’re left with a lot of tentative possibilities. Avalon is definitely going to Perseus, and Grove/Atlantic is pretty well on its way, too. PW Daily reported yesterday that if the court approves the proposal, PGW will continue to provide distribution services for publishers before ultimately transferring their books and operations to Perseus’s distribution facility in Jackson, Tenn. It is unclear what the long-term role for PGW staff will be in the Perseus operation. And sources also told both PW Daily and Shelf Awareness that Levy Home Entertainment, whose main business is supplying mass market outlets with books, is still working on a bid to acquire AMS’s warehouse club business. That’s because they have opened an office in San Diego and hired on several former AMS staffers, though neither AMS nor Levy confirmed the reports directly to either publication.

Today in AMS: S&S Bid Rejected, Economies of Scale

Buried at the end of Julie Bosman‘s New York Times piece about Perseus‘s offer to acquire the distribution contracts of Publishers Group West clients is that the federal bankruptcy court in Delaware rejected a bid by Simon & Schuster to reclaim books in Advanced Marketing Services‘ inventory that could be valued at $5 million. “We made an aggressive move to reclaim the books that were in their possession during the 45-day period before they filed Chapter 11,” said Simon & Schuster VP of marketing Adam Rothberg.

And the San Diego Union-Tribune reports that a Jan. 31 hearing has been scheduled on AMS proposal to establish procedures to sell all or part of the company or to find an investor willing to put up new capital or refinance its debt.

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Today in AMS: WSJ Picks up the Story

When it comes to the Wall Street Journal, I’ve learned not to ask the obligatory “what took so long?” question because they seem to go through about triple the research and vetting standards that most of the major newspapers do in order to file stories. And by delaying on the AMS bankruptcy debacle, they give the story – and the perilous situation for Publishers Group West publishers – new life. Most of Jeff Trachtenberg‘s piece focuses on Perseus‘s plan to pay PGW’s publisher clients 70 cents on the dollar for their claims in exchange for dropping their claims against AMS and sign an extended book-distribution agreement with Perseus. Not only has Avalon, which announced its move to Perseus earlier this month, signed on, but so now has Grove/Atlantic.

“It’s a natural extension of what we’ve been doing the last few years,” said David Steinberger, Perseus’s chief executive. Steinberger said it will cost an estimated $20 million to pay PGW clients for their claims. That money could be paid out in a matter of weeks, if the court approves the deal. But Soft Skull‘s Richard Nash is one publisher who is worried about his prospects for survival in the wake of bankruptcy. That’s because Soft Skull is owed $110,000 by PGW and anticipates big bills as booksellers send back unsold copies from the holiday season. Soft Skull is debited for the wholesale price of each returned book and so far, those returns total $20,000 this month. Nash is also $250,000 in debt, including $40,000 from family members that he considers a personal loan.

If Perseus is successful, it will have an estimated 250 independent book-publishing distribution clients. And that’s where it becomes tricky. Because if every one of PGW’s clients signs on with Perseus, it gives the distribution company a tremendous amount of power. Aside from their in-house imprints, they are also responsible for distributing books under the CDS and Consortium arms, totaling approximately 120 separate publishers. Add in PGW’s approximately 150 publishers and suddenly, the vast majority of independent publishers owe their abilities to get their books into bookstores to a single company. And if the AMS mess has proved one thing, it’s that the perceived autonomy PGW had ended up amounting to very little. Which is why, as Radio Free PGW points out, it’s a good idea to look at those prospective contracts very, very closely.

Today in AMS: PGW’s Rallying Cry, SCB has its say

A letter sent yesterday afternoon to Publishers Group West clients by CEO Rich Freese updates them on various matters relating to AMS’s Chapter 11 filing. The company continues to do business with Avalon (which jumped ship to Perseus last week) and Freese also adds that “AMS and PGW are speaking with Perseus, along with a number of other companies and investors, regarding opportunities to strengthen our financial position. It is premature to discuss any of the alternatives at this time.”

With regards to returns, Freese states that “any returns physically received at our Indianapolis distribution center pre-petition (prior to our Chapter 11 filing on December 29th) have been applied to pre-petition payables to PGW publishers. Up to this point, we have not been deducting post-petition returns (after our December 29th filing) from post-petition payments to publishers. We are currently working on establishing procedures to handle charging back post-petition returns against PGW publishers’ post-petition sales.”

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Today in AMS: Major Shareholder Resigns from Board, PMA Plans PGW Help

What’s a stockholder to do when he’s lost a boatload of money, tried to turn a company around from the inside and received little support? Robert Robotti‘s answer, announced this morning, was to resign from Advanced Marketing Services’ board of directors. Robotti, appointed a director last November, stated that he disagreed with the Board’s decision to proceed with the annual meeting of stockholders on January 24, 2007, as previously scheduled, even though AMS is facing more court battles in the wake of its Chapter 11 filing and its litany of problems going back several years.

Meanwhile, PW has more on Avalon‘s sale to Perseus, confirming that the deal was a long time in coming. “Moving distributors is at least a three-year commitment and I’m not sure I wanted to stay through 2010,” said Avalon president Charlie Winton. As discussions with Perseus progressed, Winton became convinced that the company, with its decentralized structure and satellite offices, would be a good fit for Avalon. Radio Free PGW’s perspective is that the selloff won’t make that much of a financial difference to the fortunes of Publishers Group West, but “the death knell for PGW would be if Grove/Atlantic, Berrett-Koehler and perhaps New World cut and run.”

And what of those other PGW clients whose distribution fate hasn’t been decided? PW Daily reports that PMA, the Independent Book Publishers Association, has put together a plan it hopes will help out with some of the “extremely challenging issues” for PGW clients. According to PMA director Terry Nathan, the association plans to act in three areas: establish a network of printers that will do short runs of books, to get inventory back in the control of the affected publishers; contact financial institutions to provide short-term business interruption loans; and look for other distributors to step in and help with interim distribution and/or cash flow.

Today in AMS: PGW Conference Calls, Bankruptcy Court Hearings

Publishers Lunch reports that Publishers Group West clients were explained in a conference call yesterday he details of the offer being formulated by Perseus Books Group, which has already secured distribution rights for Avalon Publishing Group and its imprints. The rough plan is for Perseus to pay 70 cents on the dollar of what clients are owed up to the date of the bankruptcy filing. PGW would continue operating as is for the next six months before clients accepting the Perseus offer would move over to their distribution facility. Though other offers could still be tendered, 70 cents on the dollar is a lot higher than what PGW clients were expecting.

So on the face of it, this looks like Perseus could well be PGW’s savior – or is it? Never mind that already the company is responsible for CDS and Consortium clients, and adding the full roster of PGW clients would give it a gigantic stake in independent publishing, with the ramifications and consequences still very much up in the air. Never mind that there’s no word on which of PGW’s clients were included in the conference call, as grumblings have reached GalleyCat‘s ears of “musical chairs”-like prioritization, potentially leaving some struggling independent publishers out in the cold, with little recourse but to shut up shop. In other words, the news sounds good – but optimism is far from guaranteed.

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