Posted in: Comics, Current News | Tagged: AENT, diamond

AENT Claims "The Fix was Definitely in" on Diamond Bankruptcy Auction

Alliance Entertainment's legal representation made a number of surprising claims about the Diamond bankruptcy auction process during an April 2, 2025 hearing.

Published Sun, 13 Jul 2025 12:27:04 -0500

by Rich Johnston

Last updated Sun, 13 Jul 2025 12:39:16 -0500

Comments

Thanks to the US Bankruptcy courts unsealing previous court transcripts, we have seen how the Diamond Comic Distributors seemed to go without a hitch. Then the events that directly occurred after the auction, that saw winning bidder Alliance Entertainment or AENT pushed aside in preference to the back-up joint bidders Universal and Ad Populum, and for the first time, the reasons given by Diamond Comic Distributors, the debtors of the Chapter 11 bankruptcy for that rejection. Well, Jason Teele of legal firm Sills Cummis & Gross, representing AENT, had his say during the hearing on April 2, 2025.

"You might be surprised, or maybe you won't be surprised to learn, that we disagree that the process worked. There's an important timeline concerning the auction process that has not been disclosed or revealed to the Court to date."

Oh, you know how we love a timeline. I guess we will have to rewrite this one again.

"The stated purpose of any bankruptcy auction, as Your Honor is well aware, is to create a level playing field for qualified bidders to bid on the assets for sale, and that did not happen in this case. Instead of calling the various qualified bidders to the auction last week to put their best foot forward and conclusively identify the highest and best bid for these assets, the Debtors treated the auction as a jumping off point to identify the two high bidders, and then to conduct negotiations privately outside of the purview of the other bidders, off the record, in order to attempt to improve the bids."

Those would have been AENT and Ad Populum/Universal. So, how did it go down according to AENT? Again, these details, which have been greatly debated, are being revealed for the first time.

"My client, the successful bidder at the auction, acquiesced to the Debtor's various demands and improved its offer, which was the high offer at the auction, by more than $14 million total consideration. Of the five buckets of categories of disputed — disputes in the Asset Purchase Agreement that Mr. Minuti spoke about, initially my client agreed to all four of those as the Debtors had demanded. Late in the day, or late in the week this week, we acquiesced to the fifth demand. So we had met all of the requirements of their subsequent bidding that they put in our way."

So what was the problem?

"The problem, however, was during the auction — which I'll talk about in a second — and since the auction, the Debtors have refused to engage with Alliance at — on any meaningful level, starting the day after the auction when we were expected to deliver an Asset Purchase Agreement that reflected the results of the auction, which we did. Which we did not receive a single response to for days. In fact, we received our first response to that evening before the last hearing, which is when it became clear that the Debtors were going to need to come here to Court and ask Your Honor to adjourn that hearing 'til today. We have now turned several versions of the Asset Purchase Agreement, all in response to the Debtor's demands. There is not a single demand that the Debtors made since the auction that we have not met in the Asset Purchase Agreement. The last Asset Purchase Agreement that we sent to them yesterday late afternoon or early evening acquiesced to the fifth disputed item, precisely as the Debtors had insisted that we do. And the response to that simply was a terse email that says we're still going to proceed with the backup bidder."

Diamond Comic Distributors, the debtors of the Chapter 11 bankruptcy, stated that this final agreement was late, and so they went ahead with the back-up bidder… an hour before they received it. And did not change their minds. Jason Teele continues;

"A backup bidder who has not produced an Asset Purchase Agreement, who was combined with the other party as part of the backup bidder at the auction, unbeknownst to anybody participating in the auction. When the parties walked into the room, it was simply announced that these two were now bidding together as a team against the other bidders. Notwithstanding that, my client still submitted the highest and best bidder, as I don't think anybody in this courtroom would refute, and as the Notice of Successful Bidder filed on the docket would reflect. Our bid, as it stands as of last night, which we still have not received a response to other than to say they're continuing to proceed with closing to the backup bidder, remains the highest and best offer. We have an Asset Purchase Agreement that is ready to go. My client — the chairman of my client is sitting in the courtroom, ready, willing and able to testify as to any aspect of this sale process, any aspect of his company, his financial wherewithal to close, et cetera, to satisfy the Court of its ability and desire to close. Alliance remains today ready, willing and able to close next week, on April 10th, which was the date set forth in the stalking horse bid for the outside closing date, which the Debtors insisted all of the bidders meet in their competing bids. Our bid at the auction has improved by virtue of these off-the-record post-auction bidding from $70,880,000 net, to $81 million. There's no indication on the record or otherwise that the backup bidder's offer has improved that. In addition to that, and there's no information since the auction available to anybody, including the Court, but at the auction and it's on the record, the — at the record of the auction — the two backup bidders' bids were contingent if one bidder didn't close, then the other bidder had the right but not the obligation to purchase that non-closing bidder's assets. But there could be a result where one of the two bidders fails to close. And having seen no APA — there wasn't one at the auction, there wasn't one after the auction, Mr. Minuti just confirmed for the Court that they don't have one today that they're ready to show anybody — that risk is significant to this bankruptcy estate. And my client is sitting here ready, willing and able to pay total consideration of greater than $81 million to close this thing on April 10th…"

After discussing other matters about employee pay, Teele concluded;

"I think we will show Your Honor that — if you've heard the expression the fix was in, the fix was definitely in on this auction. And the result is unfair. It's unfair to the Creditors of this estate, and it's certainly unfair to all of the parties that showed up to bid in good faith and who were met with a cold shoulder from virtually every professional on the Debtor's side."

What happened next is that AENT would win in court, become the auction winner again, but then pull the whole plug over the details of the Wizards Of The Coast contract with Diamond, worth eight figures, over which they are now suing Diamond, the debtor over. I look forward to those court transcripts being unsealed as well…