Matthew W. Cheney, Acting United States Trustee for Region Four, has filed a motion to convert Diamond‘s Chapter 11 to Chapter 7 or dismiss the case.
In January, Diamond Comic Distributors, Diamond Select Toys, and more filed a petition for Chapter 11. But, Diamond hasn’t filed a Monthly Operating Report since commencing the case. The reports for January, February, and March or overdue.
Due to that, Cheney has filed a motion with the court to convert the Chapter 11 to either Chapter 7 or dismiss the case.
Chapter 7 would be a potential nail in the coffin for Diamond as well as some of the creditors owed. In Chapter 7 a trustee is appointed to manage the case and liquidates the debtor’s non-exempt assets. After that, the trustee distributes the proceeds from the sale of the assets and the court issues a discharge order which eliminates most eligible debts.
There is a possibility of “other and further relief.”
This move is a headscratcher as Diamond has paid a considerable amount of money already to consultants to manage the bankruptcy, which you’d think would include this, and Diamond recently asked for $3 million more from their bank lender, which you’d kind of need to know your finances to know you need that.
The news comes as Alliance Entertainment has decided to not pursue their winning bid in the process. Diamond has stayed relatively quiet but has stated they are working with third parties which is believed to be the back-up bidders of Universal Distribution and Ad Populum.
It also raises some questions as to the reason Alliance pulled their bid. We assumed the reason was due to tariffs changing the landscape of the collectible and tabletop game business. But, maybe there was something else, like Alliance found something in the books they were unaware of?
In short, sounds like it’s shit or get off the pot moment for Diamond. This may be just a warning or it may be something more serious. A hearing has been set for May 27.
You can read both documents filed below.
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Source: Graphic Policy
