Breaking: Old Diamond intends to sell off comics inventory to pay debt to Chase

What I would term a “blockbuster filing” in the Diamond Bankruptcy case dropped today. In a new filing, as reported by Graphic Policy, Diamond has just filed a plan to sell off the remaining inventory of 128 of their creditors in order to pay off their debt to Chase Bank. To be clear this is a motion by OLD Diamknd, not the new owners as initially wrote.

Chase Bank has been financing Diamond’s daily operations – and hiring of numerous expensive consultants and bankruptcy administrators – even as Diamond lost $10 million in value. The loan was originally secured by Steve Geppi’s other companies, but the DIP financing has ben increased four times. 

You’ll recall that new Diamond stopped sending publishers their inventory a few weeks back, even though it is considered to be housed by Diamond on a consignment basis: the stock is owned by the publishers but stored by Diamond to sell to comics shops. This plan would explain why – the inventory was on hold from the bankruptcy.

Diamond says that 128 companies – which include Marvel, DC and many toy companies – gave up their rights to their inventory on a technicality: “None of the vendors that provided consigned inventory to any of the Debtors filed a U.C.C.-1 financing statement against any of the Debtors prior to the Petition Date.”

A U.C.C.-1 is defined as “Uniform Commercial Code Financing Statement (UCC1) is a legal form that a secured party files to give notice that it has or may have an interest in the personal property of a debtor.”

It is possible that a few creditors may have foreseen this, as the 128 creditors list does not include The Pokemon Group, which objected early on to the proceedings. But overall, sadly, this kind of technicality applies in many bankruptcies, and could potentially be upheld.

The

Plan from Old Diamond:

The Debtors seek to sell or otherwise dispose of the consigned inventory pursuant to the procedures described in this motion (the “Consignment Sale Procedures”) to maximize its value for their estates. To that end, the Debtors and their professionals, in the exercise of their business judgment and in consultation with the DIP Lender and the Committee, and subject to Court approval of this Motion, will work diligently to conduct the Consignment Sales in an efficient and value-maximizing manner consistent with the Consignment Sale Procedures.

The plan is laid out as follows:

Following the closing of the sales of a substantial majority of their assets, the Debtors are in possession of significant inventory that was shipped to the Debtors on a consignment basis.

3. The consignors have not satisfied the requirements under applicable law to perfect their interests in this consigned inventory. As further explained below, this give the Debtors the right to transfer title to this inventory free and clear of the consignor’s interests.
4. The Debtors accordingly seek to sell or otherwise dispose of the consigned inventory free and clear of the interests, if any, of the consignors.
5. To that end, the Debtors seek approval of Consignment Sale Procedures (as described and defined herein) to permit them to market, sell, and/or otherwise dispose of consigned inventory expeditiously, minimizing costs and maximizing recoveries in order to generate the best result for the estates.

Needless to say, this might come as a big surprise to some of the Diamond creditors, who include:

CONSIGNMENT VENDORS

1. 12 Gauge Comics LLC
2. 801 Media Inc
3. A Wave Blue World Inc
4. Ablaze
5. Abstract Studios
6. Ack Comics (Amar Chitra Katha)
7. Action Lab Entertainment
8. Aftershock Comics
9. Ahoy Comics
10. Ait/Planetlar
11. Albatross Funnybooks
12. Alien Books
13. American Mythology Productions
14. Antarctic Press
15. Ape Entertainment
16. Apex Publishing LLC
17. Archaia Studios Press
18. Archie Comic Publications
19. Artists Writers & Artisans Inc
20. Aspen Mlt Inc
21. Avatar Press Inc
22. Bad Egg LLC
23. Bandai Entertainment Inc
24. Battle Quest Comics
25. Bedside Press
26. Behemoth Entertainment LLC
27. Benitez Productions
28. Black Mask Comics
29. Black Panel Press
30. Blind Ferret Entertainment Inc
31. Boom Entertainment
32. Bundoran Press Publishing House
33. Chizine Publications
34. Clover Press LLC
35. Cryptozoic Entertainment
36. Dark Horse Comics
37. DC Comics
38. Desperado Publishing
39. Diamond Comic Dist.-Stock
40. Difference Engine Pte LTD
41. Digital Manga Distribution
42. Drawn & Quarterly
43. Dstlry Media
44. Dynamic Forces
45. Eros Comix
46. Eureka Productions
47. Fairsquare Graphics
48. Fantagraphics Books
49. Fiery Studios Inc
50. Frank Miller Presents LLC
51. G T Labs
52. Gemstone Publishing
53. Gen Manga Entertainment
54. Gold Key Entertainment
55. Good Trouble Productions LLC
56. Goodman Games LLC
57. Graphic Mundi – Psu Press
58. Graphitti Designs
59. Green Ronin Publishing
60. Gungnir Entertainment
61. Heavy Metal Magazine
62. Hermes Press
63. Humanoids Inc
64. Idw – Top Shelf
65. Idw Publishing
66. Image
67. Image Comics
68. Joe Books Inc.
69. Laguna Studios
70. Les Editions Pix’N Love
71. Lev Gleason
72. Lion Forge
73. Lionwing Publishing LTD
74. Living The Line
75. Locust Moon Press
76. Mad Cave Studios
77. Magma Comix
78. Magnetic Press Inc.
79. Manga Classics Inc.
80. Marvel Comics
81. Marvel Prh
82. Massive
83. Moonstone
84. Nbm
85. Netcomics
86. Night Shade Books
87. Norma Editorial S.A.
88. Oni Press Inc.
89. Opus Comics LTD
90. Paizo Inc
91. Panini UK LTD
92. Papercutz Inc
93. Pegamoose Press
94. Prime Books LLC
95. Rabbit Publishers
96. Radical Publishing
97. Red Giant Entertainment
98. Renaissance Press
99. Roll For Combat
100. S7 Games
101. Scout Comics
102. Sea Lion Books
103. Seven Seas Ghost Ship
104. Slave Labor Graphics
105. Soaring Penguin Press
106. Source Point Press
107. Starburns Industries Press
108. Storm King Productions Inc
109. Sumerian Comics
110. T Pub
111. Th3Rd World Studios
112. Titan Comics
113. Tokyopop
114. Toonhound Studios LLC
115. Twomorrows Publishing
116. Ubiworkshop
117. Udon Entertainment Inc
118. Valiant Entertainment LLC
119. Vault Comics
120. Wicked Cow Studios LLC
121. Wildside Press LLC
122. William M Gaines, Via Gemstone
123. William M. Gaines Agent, Inc.
124. Wyrm Publishing
125. Yaoi Press LLC
126. Z2 Comics
127. Zenescope Entertainment Inc
128. Zombie Love Studios

We can only say that anyone who wrote off their inventory and debt to Diamond on Day 1 is probably in a happier place today. OR perhaps the few who knew to file the right paperwork. Anyone who didn’t might be in a tighter spot.