Advanced Marketing Services files Chapter 11; enters agreement for $75 million DIP

By Caroline Salls

Pittsburgh, Dec. 29 - Advanced Marketing Services, Inc. filed for Chapter 11 bankruptcy Friday in the U.S. Bankruptcy Court for the District of Delaware.

In conjunction with the filing, the company has entered into a loan agreement for $75 million in debtor-in-possession financing from Wells Fargo Foothill, Inc., subject to court approval, which is expected to provide sufficient liquidity to meet the company's ongoing operating needs during its reorganization.

Interest on the DIP will be Wells Fargo's Prime rate plus 350 basis points.

Maturity will be six months from closing.

The company will pay a letter-of-credit fee of 350 basis points times the undrawn amount of all outstanding letters of credit, a $750,000 closing fee and a $5,000 per quarter servicing fee.

According to a company news release, during the past few months, Advanced Marketing explored a number of alternatives to strengthen its financial base and resolve past legal and regulatory issues.

Despite making some progress, the company said it was unable to secure new financing and its current loan facility, which is used to finance its operations, was not extended beyond Dec. 28.

"This move will permit AMS, with its investment banker, to continue to pursue strategic alternatives," president and chief executive officer Gary M. Rautenstrauch said in the release.

According to court documents, the company's largest unsecured creditors include:

• Random House, New York, with a $43.35 million trade debt claim;

• Simon & Schuster Inc., New York, with a $26.46 million trade debt claim;

• Penguin Putnam, Inc., New York, with a $24.61 million trade debt claim;

• Hachette Book Group USA, Boston, with a $22.57 million trade debt claim;

• HarperCollins US, Jefferson City, Mo., with an $18.03 million trade debt claim;

• Publications International, Lincolnwood, Ill., with a $12.55 million trade debt claim;

• VHPS, New York, with a $9.6 million trade debt claim;

• Andrews McMeel Publishing, Kansas City, Mo., with an $8.66 million trade debt claim;

• John Wiley & Sons, Inc., Somerset, N.J., with a $6.03 million trade debt claim; and

• Leisure Arts, Menlo Park, Calif., with a $4.66 million trade debt claim.

The company lists more than $100 million in both assets and liabilities, with debt including $41.51 million outstanding on an up to $90 million revolving credit facility.

According to the release, the filing does not include the company's international subsidiaries in the United Kingdom, Mexico and Australia.

Advanced Marketing is a San Diego-based provider of customized merchandising, wholesaling and contract distribution services. Its Chapter 11 case number is 06-11480.

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