Diamond updates: “AENT’s self professed naivete defies credulity.”

Just a few little updates here:

• From a filing yesterday it looks like The Big Showdown – the hearing to decide who gets the consignment inventory – has been moved to October 22. It had previously been scheduled for September 30. This will not only disappoint the person I spoke with at SPX over the weekend who was planning to attend (if possible) but probably is frustrating for Old Debtor Diamond as well, because the longer this drags on, the more money they owe. It’s not clear who asked for the stay – perhaps that paperwork will come through today –but it could be something to do with the 31 lawsuits that Debtor Diamond filed last week. 

• Diamond Previews, the catalog that chronicled an industry, is no more. Not even a digital edition. Issue #445, previewing books for December, will be the final issue. 

Allyn Gibson, the main writer for Previews, has been chronicling its slow sunsetting on his blog. Last Wednesday was his last day, and he also wrote about it on LinkedIn, where former Diamond employees lauded his dedication and lamented the end of an era.

Gibson’s blogs – and comments here at the Beat! – are shedding some light on the gloomy Last Days of the Diamond Empire…a mish mash of different companies, and in a post last week, a bleak assessment of the future:

Diamond, what remains of it — and I am speaking here of the active distribution business, not the “estate” — will not last much longer, maybe not even until the end of the year. At least one of the Brand Managers in Purchasing was let go yesterday, and the Purchasing Team was already depleted from departures, by choice or not. The company — maybe division is a better word — isn’t developing new business, isn’t trying to develop new business. There’s no active desire to generate new revenue, just a resigned state of affairs in monetizing what remains in Olive Branch. This is not a viable business model over the long-term. It’s about extracting what value can be bled from the stone now, and when no more value can be wrought, wind it down and shutter it,

To the few who remain, please look to leave sooner rather than later. Diamond Comic Distributors II is living on borrowed time.

I thought today, driving home, that Alliance Entertainment, who had won the bankruptcy auction for the assets, probably dodged a bullet when they withdrew their bid and the consultants went with the back-up bidders instead. I thought about a situation where Alliance had won the auction and taken ownership… and then the estate said, “Oh, wait a minute, you don’t own any of the consignment vendor merchandise, neither do the vendors. It all belongs to us.”

It is indeed an interesting thought experiment to consider what Alliance – a seemingly well run company that is moving briskly into the collectibles space – would have made of the consignment battle. 

And perhaps this idle thought while driving home provides the answer to the great mystery I’ve been trying to crack for months: why did the bankruptcy sale executives – Robert Gorin and Raymond James – promote the Ad Populum/Sparkle Pop bid over the Alliance bid? Could it be that the answer was here all along? Maybe they always planned to sell the consignment inventory and knew Alliance would object…..but Sparkle Pop wouldn’t? 

• As it happens, Raymond James, the finance company that oversaw the bankruptcy sale process, has just filed their answer in the Alliance v Diamond lawsuit, in which Alliance is alleging breach of contract, fraud and other things, and trying to get their $8.5 million deposit back. And Raymond James is not mincing words. 

Despite that professed experience, AENT claims that it was beguiled into signing the heavily-negotiated AENT APA by the vague statement that “the Debtors’ relationships with their key vendors were strong and stable and the Debtors remained in good standing with them.” Apparently AENT unwittingly understood that general statement as a representation regarding the term of a specific contract with a specific vendor. AENT’s selfprofessed naivete defies credulity.

From there we go into a lot of legalese, “duplicative implied covenant claims,” and Ryamond James defense boils down to: Alliance’s is making a flimsy case and they should have known better, because their APA assumed that contracts would be set at closing, and they were. No backsies. 

I’m not a lawyer but….: “The Debtors did not conceal the fact that they were not disclosing the expiration dates of their contracts with their vendors, as AENT admits.” How is not disclosing something not concealing something? Head hurts. The concealment in question is that WotC was ending their contract with Diamond, a contract which supplied 25% of Diamond’s income. The Alliance complaint has a pretty colorful timeline of Diamond not revealing the end of the contract, including, allegedly, blacking it out. 

Anyway, these are highly technical objections, but they could be sound. We shall see! So many law suits, so much discovery!