The federal bankruptcy court in Baltimore has ordered that the Diamond Comic Distributors Chapter 11 reorganization be converted to a Chapter 7 liquidation, effective the end of the day on December 29, 2025. The order was approved with some changes from the initial motion to convert (see “Bank Pulls the Plug“) after the Ad Hoc Committee of Consignors filed limited objections to the proposed order. Under the order, the various disputes in which Diamond is involved are stayed until February 16, and consignment creditors get a relatively small amount of money.
The court order provides for the release of $300,000 in an escrow related to the mediation between the consignors and Diamond over the fate of the millions of dollars in consignment inventory stored in Diamond’s warehouse at the time of its bankruptcy, which Diamond is attempting to seize and sell (see “Mediation“). The money is to be released to the Ad Hoc Committee of Consignors and the Consignment Group, two sets of consignment suppliers to Diamond, in payment toward administrative claims (for purchases made between the filing and the sale of the Diamond, Alliance Game Distributors, and other Diamond companies). Diamond listed nearly $10 million in post-petition debt in its most recent financials filed with the court.
The order approves the agreement with debtor-in-possession lender JPMorgan Chase Bank N.A., which provided for a brief extension to its loan and the funding of a limited additional loan amount to allow an “orderly transition” to Chapter 7.
The conversion to Chapter 7 comes nearly a year after Diamond filed Chapter 11 bankruptcy and continued to operate while it sold the company’s assets (see “Diamond Files Chapter 11“).
Source: ICv2
